Pending FDA Decision Could Make This Penny Stock a Tempting Play Penny stock investors tend to have more risk tolerance than their mid- and large cap peers. Penny stocks are, the adage goes, more speculative, and akin to tossing your money out the window. The fact of the matter is, investing in penny stocks shouldn’t be any riskier than any other asset. Except when it comes to drug manufacturing. You could invest in a juggernaut like Pfizer Inc. (NYSE/PFE); a company that has proven technology, and actually generates revenues. Or, you could take a risk, and look at companies that are still in the development stage. If you want to park your money in a speculative drug manufacturing penny stock and you have lots of patience, you can look for companies that are in the early stages of development. If you like risk and don’t have patience, you could find a penny stock that is in the late stages of development. Even better, you could look for a penny stock that is awaiting judgment from the U.S. Food and Drug Administration (FDA). The primary product of Alexza Pharmaceuticals, Inc. (NASDAQ/ALXA), “Staccato” inhalers, can lead to swifter drug absorption. Before use, the patient triggers the heating element, which vaporizes the medicine, allowing the patient to inhale it. The medicine is then rapidly absorbed through the lungs at a rate typically faster than oral and intravenous applications. Alexza Pharmaceuticals targets neurological disorders, including addiction and anxiety. Alexza has a market cap of $66.56 million, $18.53 million in cash, and $1.54 total cash per share. On August 8, Alexza reported revenue for the first half of fiscal 2012 of $2.6 million, a slight increase over the $2.5 million recorded in the same prior-year period. The company said year-to-date losses came in at $10.8 million, or $1.03 per share, versus a loss of $17.4 million, or $2.74 per share, from a year earlier. More significantly, investors are, it seems, waiting anxiously to find out what the FDA thinks about its Staccato inhalers. And, they shouldn’t have to wait long to find out. After two previous failed submissions (December 2009 and May 2012), a decision from the FDA is expected by December 21, 2012. Staccato is also under review in the European Union. The company expects to receive a CHMP (Europe) Day 210 approval opinion in December, and has partnered with Grupo Ferrer in Europe for other regions, including the U.S.
Chart courtesy of www.StockCharts.com Ongoing attention from Wall Street, an encouraging outlook, and speculation have been helping Alexza’s share price trend higher. The recent trading activity suggests Alexza might find support near its 200-day moving average. Further, the company’s 50-day moving average is gaining momentum, and could cross the 200-day mark in the near term; a bullish sign. All the technicals and fundamentals aside, penny stock investors are really waiting to see what the outcome is with the U.S. and European Union approval decision expected in December. Until then, shares of Alexza could experience a speculative boost. Those penny stock investors who guess correctly on a “yes” vote from the FDA should experience further gains with Alexza. We Told You So… On August 10, Penny Stock Detectives editor Mitchell Clark noted that, while stock market action may not be robust, there are still good event-driven trades to be found. His timing was right when it came to GenMark Diagnostics, Inc. (NASDAQ/GNMK), a manufacturer of molecular diagnostic testing systems. (See: Stocks Moving on Good News, But Investor Sentiment Depends on the Fed.) Before being highlighted in Penny Stock Detectives, GenMark Diagnostics, Inc. experienced a solid turnaround on August 8, when its share price popped on strong second-quarter results. Since being profiled by Clark, GenMark’s share price has continued to trend higher. On September 27, it hit a new 52-week high of $9.50; for a short-term gain of 38.68%.
Published on Oct 17, 2012
Penny stock investors tend to have more risk tolerance than their mid- and large cap peers. Penny stocks are, the adage goes, more speculati...