What’s with All the Bubble Talk?

Written by GSCR Staff   
Tuesday, 05 May 2015 07:01

Feliz Cinco De Mayo!

Maybe it’s just human nature, but if you read some of the online stock market websites yesterday you would have thought somebody died, literally. Check out this one from MarketWatch on the outlook from mogul Bill Gross.

 

http://www.marketwatch.com/story/bill-gross-says-death-is-coming-for-him-and-this-bull-market-2015-05-04

 

These pages were filled with several warnings and prognostications for a downturn in the market as all the major indexes are above or near record highs. Is this just good old fashioned fear mongering, or do any of these pundits have a point? In any case, it may be time to look for a cheap small cap play in an old reliable sector, biotech.

 

It is worth mentioning again, PowerShares S&P SmallCap Health Care ETF (NASDAQ – PSCH - $67.17) is on fire up over 12% YTD and nearly 30% since last year at this time. One stock that appears to be undervalued is OncoGenex Pharmaceuticals, Inc. (NASDAQ – OGXI - $2.00 -NR) and the one year chart is illustrated below.

 

OGXI 1-Year Chart

(Source: www.otcmarkets.com)

 

MM.05.05.15.ogxi-1year

 

OncoGenex is a biopharmaceutical company committed to the development and commercialization of new therapies that address treatment resistance in cancer patients. OncoGenex has a diverse oncology pipeline, with each product candidate having a distinct mechanism of action and representing a unique opportunity for cancer drug development. Custirsen is currently in Phase 3 clinical development as a treatment in men with metastatic castrate-resistant prostate cancer and in patients with advanced, unresectable non-small cell lung cancer. Apatorsen is in Phase 2 clinical development and OGX-225 is currently in pre-clinical development

 

The Company has recently had a major breakthrough in its pipeline. First, last week OncoGenex announced that it filed an amendment with the U.S. Food and Drug Administration, as well as initiated filing with regulatory agencies in other countries, to amend the statistical design and analysis plan of its pivotal, international Phase 3 ENSPIRIT trial evaluating Custirsen in the treatment of non-small cell lung cancer (NSCLC). The protocol amendment is designed to reduce the number of required patients enrolled in the trial and include an earlier, more rigorous second interim futility analysis. This was after the Company announced it regained rights to Custirsen from Teva (NYSE – TEVA)

 

We think this deal puts some momentum back into OGXI pushing it back toward a 52-week high of $4.33. The Company has no debt as of December 31, 2014. On the technical side a short float of 2.6% is a great indication that there are not many doubters. We think the stock climbs back to $3.00 by the middle of 3Q15.

 

Have a great day!

 

Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.

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