Hi Lou,

I had the misfortune of holding a large position of Cardiome for 15 years, and the latest news does not look good. What is your opinion of the company now and should I sell now and move on, I averaged $10.00 per share.

Thanks,

 Alijah

Hi Alijah,

May last post on Cardiome Pharma Corp.( COM TSX) was on May 31, 2010 for Mario. At the time it looked like COM had gotten ahead of itself. It was recommended that Mario wait for a convincing break above $9.00, where there was resistance and confirmation of support at $8.00, before committing new capital. The advice proved valuable as the stock gave up a lot of ground soon after the report.

The charts will provide a good basis to help you answer the questions you have asked.

The three year chart tells the story of COM as it traded in a range bound pattern through August of 2010. It bounced off support at $8.00 and met resistance at $9.00 through five oscillations but then burned through support all the way to $4.60 in November of 2010. It did catch a bounce off the lows and advanced to $7.00 where it met resistance along the 200 day moving average.

The best outcome from this point would be for COM to trade in a range between resistance at $7.00 and support at $5.00

The six month chart illustrates investor reaction to the Q4 results reported on March 10, 2011. Not good to say the least. At this point it looks like we will be lucky to climb back to support at $5.00. Given the selling momentum we may have to retest the lows at $4.60 before we get some buying conviction.

In terms of your dilemma I would say most of the problem is holding a non dividend paying stock for 15 years. You could have been trading this one for income as COM has provided lots of opportunities to generate profits since 1996.

 I don’t know if you should sell now and move on but I do know that if you have been in it for all these years I would assume you know the story very well. If you can leverage that knowledge with some trading signals I think you will be well served marrying the two.

Happy Capitalism!

I have been holding BVF for quite some time at a cost of $22.76. With the merger with Valeant how do I figure out what the price will be towards the end of the year if it does happen.

Would appreciate your expert opinion.

Thank you
Barbara

Hi Barbara,

Thanks for the assignment. Its been quite a long time since I have even thought of Biovail Corp. ( BVF TSX) as anything other than a short. BVF has been selling off since 2001 when it traded above $80.00 a share. I guess you jumped in at $22.76 anticipating a bottom and then found new lows with your money. Been there, done that, ate losses myself! Looking at the value of the stock since the announcement of the merger with Valeant Pharmaceuticals International (VRX TSX) I think the short term good news is already baked into this pie and its about execution of their plan as we go forward.

The three year chart paints the picture of a stock that finally found a bottom in late 2008 and then built support at $14.00 in 2009 and developed a nice base over the last 12 months till it popped on the deal announcement on June 21, 2010.

The six month chart illustrates the frenzy that transpired on the deal with VRX. The RSI is signalling that the stock is currently over bought and the MACD looks to be bending to the downside. What I do like in this chart is the big flag pole that has been built and what seems to be a pennant forming. This sort of pattern is a continuation pattern that in most cases indicates that there is more to come on this advance. We still have to be patient in that the pattern isn’t complete yet but please understand that there are no guarantees that it will.

What I do like about the future of the combined company is that J. Michael Pearson, Chairman and CEO of VRX will be the CEO of the combined company. The stock chart for VRX indicates that under new management the combined company has a sustained uptrend and lots of support along the trend line. Pearson is talking tough about cutting spending and staff and as a shareholder you have to like that.

At this point I would say that you have a good chance of seeing this investment get back into the black for you by year end.

Happy Capitalism!

Hi Lou,

What’s your take on Cardiome Pharma ? It seems to be performing amazingly well so far this year including through the recent ” correction ” – I was thinking about increasing my position – any advice Lou ?

Thanks !

Mario

Hi Mario,

I have been asked a number of times over the last 7 years to take a look at Cardiome Pharma Corp. (COM TSX). With a few exceptions the stock has been in a sell off for most of the last 5 years after hitting a high close to $15.00 in July of 2005. It spiked back to $13.00 in 2008 but it was for a short period that wasn’t sustained. Lets run a few tests to see if adding to your position will improve your financial health.

The three year chart provides a view of the spike high at $13.00 in 2008 and then the steep drop to the lows of March of  2009. COM traded in a channel between support at $4.00 and resistance at $5.00 for most of the next 9 month. The stock broke above the $5.00 resistance level in December of 2009 and advanced aggressively to its current high at $9.00.

If you look at the gap between the current price of COM and the 200 day moving average you can see that there is quite a bit of space. This usually suggests that a stock has perhaps gotten ahead of itself and could be on the verge of a pull back. What is also evident at this time is that $9.00 has become a line of resistance.

The six month chart  illustrates the overhead resistance at $9.00 and the golden cross that formed after January 18, 2010. In late April the MACD turned lower indicating that advance that started in December 2009 was starting to weaken.  Even though the MACD looks to be trying to turn higher volume has been thinning out lately which puts a caution flag on the track calling into question the recent bounce off the 50 day moving average before May 25, 2010.

Before you commit new money to your existing position in COM let it make a sustained break above $9.00 and watch for continued support at $8.00 so that you hold onto the profits you have already earned.

Happy Capitalism!

Lou,

I don’t know if you can explain this one to me but I am quite mystified.

PharmaGap came out with a press release that confirms the drug candidate they have kills 100% of prostate cancer cells etc… In short a fabulous press release…

http://www.theglobeandmail.com/globe-investor/news-sources/?date=20100513&archive=ccnm&slug=607241_1

On the news 13,000,000 plus shares of 78,000,000 total shares have traded so far today and the stock goes down! I can’t believe it. Does that mean this is a scam? Pump and dump deal?

Insights would help.

Dan

Hi Dan,

There are so many reasons for the shares of PharmaGap Inc. (GAP TSXV) would sell off after the release of news regarding the tests conducted by the National Cancer Institute  (NCI) in the United States. The primary reason is the concept of feeding the ducks when they are quaking.

When buyers are bound and determined to buy the stock and the stock doubles in a few days and you happen to own some of the shares it is in your best interest to sell and take a profit. In three days GAP traded from a low of $0.14 to a high of $0.30. If you capture some of those gains it can pay for something if not for everything.

The two year chart shows a rather choppy trading pattern for GAP suggesting that you have to trade this stock for income instead of holding out for a long sustained advance.

The RSI on the six month chart provides indications that GAP was overbought and likely to see some selling coming into the market. Yesterday the stock opened at $0.30 and then gave up lots of ground by the time the session ended.

Other reasons to explain the selling on the news out of the NCI was that the test mentioned in the press release is not part of a clinical trial. The fact that GAP’s lead compound GAP 107B8 had an effect on a panel of cancers does not in anyway confirm that it will be safe to consume in the dosage used in the test or that it will effective when ingested by patients.

Another factor to consider is the Market Cap of Gap. At $9.8M it is a microcap stock which by its very nature adds a significant level of risk to the investment. As far as your question of pumping and dumping in the stock I can’t say but its clear that there are a number of other issues that need to be recognized and managed if you are going to hunt in this gap.

MAKE IT A HUGE MAY AND HAPPY CAPITALISM!

FXA seems to have a good product, turned themselves around, and have
gotten their house in order.

Why isn’t the market appreciating that?

Al

Hi Al,

Afexa Life Sciences Inc. (FXA TSX) by any othername is still CV Technologies, the developer and marketer of Cold -FX. The stock has been in a sell off since the fall of 2005 and even though it got a pop from the lows of the fall of 2009 those gains seem to be in the rear view mirror.

The good news at FXA came in 2009, as the concerns regarding the H1N1 flu and positioning Cold-FX with the 2010 Vancouver Winter Olympic Games helped drive sales. Revenue  came in at $29.5M for Q1 2010 up 50% from the year earlier period and earnings per share were reported at $0.06 from $0.03 in 2009.The three year chart tells the tale of a stock that popped and has subsequently dropped as investors decided that all the good news was baked into this cake. The chart also paints a portrait of a stock that has been selling off for a longer period of time.

Below is a 10 year chart for FXA and as you can see it’s no oil painting!

The big double top at the historical highs of $4.00 were shouting for investors to get off the ride and book some profits.

The six month chart provides a view of the most recent action in the shares and the selling pressure that has come into the stock.

FXA has breached support on the 200 day moving average and thats a caution flag. There is support at $0.50 and it could catch a bounce from there but with volume coming  in below the three month average of 100,000 shares a day it could be more of dream than a possibility.

I think that the market has the story on FXA. Its a stock that has enjoyed a nice run but investors are not convinced that it can maintain the sales increases that are seen to be  driven by one time events.

Happy Capitalism!

ANY THOUGHTS ON CANGENE CORP.

THANKS

RANDY

Hi Randy,

Cangene Corp. ( CNJ TSX) hasn’t  been on my radar for some time  and your assignment has prompted me to take another look at this player in the hyper-immune therapeutics space.

The three year chart provides the view of a stock that has been range bound  between resistance at $6.50 and support at $4.00 since December of 2008. Currently the stock is trading below the 50 and 200 day moving averages and is currently in a downtrend. Generally when a stock is in this posture its not a screaming buy unless you can see a trend reversal to the upside.

The six month chart provides a closer look at the recent trading in CNJ which doesn’t suggest a buying opportunity. The MACD signalled the break below $5.00 and the testing of support at $4.50.  If you backtest the MACD is has been a fairly good indicator of buying and selling opportunities.  The RSI indicates that CNJ is oversold which is confirmed by higher than average daily volume as the sellers hit the exit to preserve their capital.

The fast stochastic is signalling a turn but its one lonely indicator and isn’t providing enough evidence at this time to suggest a reversal.

As with all snapshots of a stock you have to keep in mind that things change and no analysis is a guarantee that the future will unfold as described. If you like the business case for CNJ it should be a stock that you have on your watch list and when it starts moving up it could provide the gains you are looking for.

If you decide to invest in CNJ I would suggest that you would need to take a trading approach. The charts demonstrate that for the last three years the stock has been quite volitile and really hasn’t lent itself to a buy and hold strategy.

The next potential entry point would come in at the $4.00 support level. At that level it looks like buyers would be willing to step up to the opportunity given that they have done so in the past. Another thing to keep in mind with CNJ is that its average daily volume over the last three months has been about 31,000 shares so there are liquidity issues that add to the risk profile.

MAKE IT A HUGE SPRING AND HAPPY CAPITALISM!

Hi,
What is happening with NCS TSX?? It’s still getting a five star rating but there seems to be no activity. Should I hang in there??
Maria
North York, ON

Hi Maria,

Its been a long time since I have looked at Nucryst Pharmaceuticals Corp ( NCS TSX) which was spun out of Westaim Corp. Here’s the rub with NCS. They are not growing their core market and their development pipeline is thin.

NCS has developed wound dressings that are coated with nanoparticles of silver to accelerate the healing process. The problem is that sales of the the dressings have not been growing as hospital administrator have aggressively squeezed the cost out of their operations.

The other problem is that some of the efforts to broaden silver’s therapeutic uses have not worked out. The company went through Phase II trials on a treatment for eczema which they discontinued when the trials didn’t show that the therapy was effective. NCS was testing the treatment on ulcerative colitis but in May of 2008 stopped that research but it is still working on applications in the treatment of c-difficile associated disease.

The three year chart gives a good view of the aggressive sell off that NCS experienced going back to 2006. It has made a nice advance from the lows but on thin volume which make me call the move into question. The average volume is 4,300 shares a day over the last three months. Thin gruel at best.

The three month chart gives us a good picture of the thin volume and the choppy trading that goes with it.

Here’s a company that has a softening market for its core product, a lack of resources that is stalling its development pipeline, a 75% shareholder in Westaim which in Q1 2009 grabbed the lions share of a $14.7M cash distribution to shareholders, and thin volume.

For my money I would look for a better prospect in the pharmaceutical space.

I got this email from Paul and thought that I would share it with you. If Visa is your “drug plan” or your Viagra bill is keeping you up at night give it a read!

Happy Capitalism!

Lou

Much of the talk during recent economic conditions refers to protectionism, tariffs etc.

Here is something I just ran across. You can save lots of money buying your prescription drugs from Costco. I paid $133.++ yesterday for a prescription.

When I heard about Costco I called them and asked for a quote. Their price was $78.++ that’s $55 less and you don’t have to be a Costco member if you just go to their Pharmacy. I’m no shill for Costco but my local pharmacy has just seen me for the last time.

I’m 63 and don’t have a drug plan. My drug plan is my Visa card. This gap is unbelievable. Competition is needed—-everywhere— and the auto workers and public sector unions just don’t get that concept.

I have detail on a pile of well-known drugs. If interested say so and I will forward. This came from the U.S. and answered the question as to why there is a CVS pharmacy on every other corner. But it is being proven to me that in Canada there is a cost saving alternative.

Paul G,
640 listener

Bridget from Truro, NS writes about MNKD Mannkind Corporation:

I am just wondering if you could let me know if this stock going to make a recovery to their previous levels? It has been trading low and seems to be trending higher recently and I am just wondering if this is a good stock to invest in?

Thanks,

Bridget

Hi Bridget,

Thanks for the assignment and the heads up on Mannkind Corp. (MNKD NASDAQ). The stock has been on a tear from the March lows. The most recent spike in the stock has been driven by the announcement that the FDA has accepted a New Drug Application (NDA) for the company’s Afresa inhaled insulin product.

A NDA does not mean that a compound gets approved for sale automatically so some of the excitement may be over done. If Afresa gets approved for sale by the FDA its expected that major pharmaceutical companies will look to partner up and move the product aggressively.

The chart shows a couple of things that are of interest. First the breaking of the downtrend that MNKD was in since late 2006. When a stock stops going down it has a chance to move higher which it has.

The RSI is indicating that MNKD is getting overbought and start to see some resistance at $7.00. To answer your question regarding the return to previous highs this stock has a lot of work to do to make the move to the $20 penthouse of profit.

I would want to see MKND build a base at $6.00 and see if it can trade in a range to $8.00 for a period of time. Once it breaks through $8 there is resistance at $10.00 then $12.00 then $14.00.

What you have to keep in mind with stocks like Mannkind is that most of their efforts and resources are spent at the lab bench and at conferences. What they need is approval to sell a compound in the market place that has a large patient base. Afresa has the potential to be that product but it has to get there first.

If they are successful in getting their lead compound into the market the next question becomes how many more opportunities do they have in their development pipeline.

Happy Capitalism!