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Riding the Mechanical Bull Market Getting Tough

By
TradeCircle
-
Mechanical Bull Market

It’s common parlance when people say that the stock market is like a roller coaster, but it’s rarely meant to apply to a single trading day. Today’s trading session actually was like a roller coaster. Or perhaps a mechanical bull, or mechanical bear, depending on your perspective.

Just looking that at the Nasdaq (NASDAQ:QQQ), we can see what a dizzying day it was. Within the first half hour, tech stocks were down nearly a whole 1%, deteriorating down 1.25% by mid morning and briefly breaking the 5000 mark. From that point we embarked on a two-hour full percent recovery, topped with another full percent gain in the space of 15 minutes.

But that wasn’t nearly the end of it. In less than an hour we were back down a full percent again, recovering half that loss by 5 minutes to close. And finally, in the last five minutes of trading, we lost a whole 13 points on the Nasdaq, with after hours bringing all major indexes including the S&P (NYSEARCA:SPY) and the Dow (NYSEARCA:DIA) very near intraday lows.

One can point to a Fed leak, over-analysis of comments and words in the FOMC minutes and various speculations about whether there will be a Fed hike in September or not. But what today’s action shows pretty clearly is that nobody has a clue. Traders are split and antsy, and today’s action betrays that uneasiness.

Whatever happens in September at the Fed meeting, it will affect markets heavily at least short term. That much is clear as day.

Gold’s (NYSEARCA:GLD) intraday action on the other hand, looked like a step ladder, as each new burst in volatility in stocks led to a concurrent jump in precious metals. Gold is now 6% off its lows in late July.

Judging by the late sharp move down in equities 5 minutes before the close, indexes are likely to open down tomorrow morning at the bell, with support at 2040 on the S&P getting closer to being tested for a third time.

In the event that happens, those riding the mechanical bull will have to bet on a triple bottom. Those riding the mechanical bear will have to bet that 2040 gets broken.

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Synta: An Under The Radar Small Cap With A Catch All Oncology Candidate

By
Jennifer Aldershot
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Synta

Oncology drugs have been a hot topic over the past six months. A number of triple digit million-dollar deals have come out of the space, and incumbents in the arena have dominated news media. However, there are still a number of small cap opportunities that remain under the radar. One such opportunity is Synta Pharmaceuticals Corp. (NASDAQ:SNTA). With a market capitalization just shy of $300 million at last close, the company is very much a development stage entity. As such, there are inherent risks associated with an allocation. Having said this, it has quietly navigated its way through both a proof of concept phase I and an efficacy rooted phase II, and as we head into the second half of this year, is poised to report phase III readouts on a lung cancer indication. Let’s have a look at the company and try to ascertain whether now is a good time to gain exposure.

Lead Candidate

Synta’s current pipeline includes three primary treatments – Ganetespib, STA-12-8666 and Elesclomol. The first two are what is called an Hsp90 inhibitor (which we will look at the little more detail shortly) and the third is a Mitochondria Metabolism Inhibitor. For the purposes of this report, we will focus purely on the former of the three candidates, as this is the one that will drive Synta’s market potential over the coming 4 to 5 years.

The Science

As mentioned, Ganetespib is an Hsp90 inhibitor – meaning it inhibits Hsp90, a type of protein that serves as a “chaperone” protein. Chaperone proteins do many different things, but to keep things simple, think of them as a sort of protein mold. Client proteins feed into chaperone proteins, and chaperone proteins “form” the client proteins into the task performing proteins they are designed to be. There is a nice mechanism of action video here that visualizes this process. Ganetespib attaches to Hsp90 proteins and blocks them from interacting with client proteins. Tumor cells are (reportedly) more heavily reliant on Hsp90 proteins for both proliferation and survival. Therefore, the theory goes that by inhibiting the interaction between client and chaperone, Ganetespib is inhibiting the result of any potential interaction. The result of the interaction, in this instance, being proteins that contribute to tumor cell proliferation. The beauty of this sort of approach is that it is not limited to one form of treatment. We’ve seen markets get excited about BRAF, HER2 and EGFR inhibition treatment already this year. Cancers associated with all these gene mutations are heavily reliant on Hsp90 interaction, so in theory the treatment can supersede these subsections and serve as an overarching fix all. Obviously, this is further down the line, but the potential is there – at least from a scientific perspective.

Clinical Progress

Synta is currently targeting a non-small cell lung cancer indication, and as we have mentioned, is well underway with a phase III. The trial sees Ganetespib tested in combination with a current chemotherapy drug called docetaxel, currently marketed by Sanofi (NYSE:SNY) as Taxotere, versus docetaxel alone. A phase II study designed to determine a phase III population completed last year, with progression free survival (the primary endpoint) for the combination therapy outpacing that of the single therapy by more than 55% – or 5.3 months versus 3.4 months.

From this phase II, physicians selected just under 850 patients for a phase III enrolment, which is currently testing towards a primary endpoint of overall survival; again, using combination versus single therapy. As mentioned earlier on, interim analysis will hit markets during the second half of this year, with final data slated for the first half of next. Both of these events could be real volatility drivers from a market capitalization perspective. If progression free survival (a secondary endpoint that will likely be addressed in the interim analysis) can fall in line with the results we saw at phase II, there could be real upside potential short-term. After that, all eyes will be on overall survival in the final data.

Financial Overview

From a financial perspective, the company has a little over $95 million cash on hand, which it expects to carry operations through to the second half of 2016. Current and historic burn rate averages out at between $2.5 and $3.5 million, but this is not really indicative of an ongoing equivalent as the next couple of years will likely be more expensive from an operational perspective than the last. This said, with no debt and a phase III underway further capital raises should be a problem (so long as we see promising interim analysis).

Takeaway

The takeaway here is that Synta is one to watch. Investors with an appetite for risk may look to take a position ahead of interim analysis, but progression free survival can be notoriously volatile short-term. As a result, what the interim analysis reveals may not be indicative of the final results. For this reason, for more risk averse investors looking to mitigate their exposure somewhat, a position in anticipation of final data mid-2016 could be a rewarding allocation.

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China Crashes Again, PBOC Losing Control

By
TradeCircle
-
China off a Cliff

Here we go again in China. When bond king Bill Gross had said to us on June 4 that Shenzhen stocks were the “short of a lifetime,” he apparently had no idea how perfect his timing was. It was perfect enough that even he didn’t capitalize on the short he called. And it looks like we’re in for crash round two after a brief reprieve, as the Shanghai index has fallen over 6% yesterday. The large cap iShares China ETF (NYSEARCA:FXI) is down 2%, with the small cap fund China A Shares (NYSEARCA:ASHR) down over 7% today.

It appears that no matter what the People’s Bank of China (PBOC) does to stop the fall, it is only successful short term. They seemingly cannot stop the bleeding for long. The PBOC may nevertheless be the only thin branch between China’s stock market and the abyss of fundamental long term revaluation downward.

This kind of market action does not happen in a vacuum. As much as Keynes and his followers want to believe that crashes only happen because of faulty “animal spirits” where a herd mentality feedback loop inexplicably forms and has everyone suddenly headed for the exit doors for no apparent reason, these things have a cause. That cause is always the central bank.

This seemingly benign chart below is the first clue.

Balance Sheet of the PBOCThe balance sheet of China’s central bank the People’s Bank of China (PBOC) peaked in February at 34.5 trillion yuan. Since then, it has declined month after month, at least through June has the chart shows. If we take a longer view, we can see how much of an aberration a shrinking PBOC balance sheet really is.

PBOC Balance Sheet Long TermThe three circles above show the three major periods since 2000 where the rate of PBOC balance sheet expansion either was severely curtailed or outright reversed. The only way a central bank can expand its balance sheet is by printing the money to do so, and when money is printed, stocks go up, because whether the PBOC is expanding its balance sheet with securities outright or buying something else, the money almost always ends up there ultimately. When that printing stops or slows suddenly, stocks go down.

The first red zone marks a lull period beginning in 2008 where the rate of balance sheet expansion suddenly slowed after a two-year burst from 2005-2007. The expansion picked up again around 2009, but suddenly stopped again in late 2011. And now, we are seeing the same stagnancy in money printing since February.

The iShares China Large Cap ETF consisting of the largest Chinese ADRs dropped 59% in 2008, 32% from May to September 2011, and has fallen 22% since its most recent peak. If we measure the most recent fall against the other two, there is still a way to go before reaching bottom.

There is hope though that this recent crash will not be as severe as what we saw in 2008 or 2011. The reason the PBOC stopped printing so abruptly those years was because of skyrocketing inflation.

Inflation Rate in ChinaIn 2008 it reached 8%, and in 2011 over 6%, and in both cases the central bank tightened monetary policy quickly in response, shrinking its balance sheet. This time, the inflation rate is muted at below 2%, if we assume the statistics are a true reflection of the Chinese economy rather than propaganda. This gives the PBOC more room to run so save the markets. How much saving will be required and for how long is the question.

Incidentally, tracking the Fed balance sheet for forecasting these kinds of moves does not work in the same way because monetary policy is literally clogged at the Fed with over $2 trillion of excess reserves backing up the works due to zero interest rates. Interest rates in China are still above 4% on the overnight rate, so there is still some control over the money supply there.

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AGTC Has A Big Advantage In The Orphan Space; And Its Not Biogen

By
Roger Hannington
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AGTC

During the middle of last week, Applied Genetic Technologies Corporation (NASDAQ:AGTC) management presented at the Wedbush PacGrow Healthcare Conference in New York. For those familiar with the space, you will remember the name as being the small cap that Biogen Inc. (NASDAQ:BIIB) announced gene therapy partnerships with earlier in the year; an announcement that translated to 10 times daily trading volume over the few days that followed, and a close to 30% gain in a matter of hours on the company’s market valuation. The company has since lost the lion’s share of this increase in value, despite no real developments from an operational perspective. The latest management presentation has, therefore, given us an opportunity. First, to take a look at the company’s pipeline with a focus on the Biogen deal, and weigh up the justification (or lack thereof) for the initial gain. Further, in light of the recent correction, to determine if there now exists an opportunity to buy in at a discount at today’s price. Here goes.

First, a quick overview. Applied Genetic Technologies focuses on orphan indications in the ophthalmology space.  Straight off the bat, this is a bonus. Why? Because one of the biggest drawbacks to chasing orphan indications is establishing clinical endpoints. Further, having decided which endpoints to target, agreeing these endpoints with the FDA can be tricky. This, of course, all takes time. However, in the ophthalmology space, endpoints are already well established. This is because sight in humans is considered high priority (for obvious reasons) and this priority has led to a large body of educational institution research in the field. Further, Applied Genetic Technologies cannot only draw on this body of research to establish endpoints, but also identify potential therapeutic paths to these endpoints. For those wondering, the four established endpoints of ophthalmology treatments are visual acuity, visual fields, color vision and contrast sensitivity.

The company uses what is called Adeno Associated Virus (“AAV”) gene therapy. AAV therapy basically means packaging up a virus in a protein shell, which (through a range of delivery methods, varying according to indication) carries through to the nucleus of a cell. In the nucleus, the protein shell breaks up and the virus is introduced. AAV has numerous indications outside of the eye, but there is one advantage of using this type of therapy in ophthalmology. Basically, when the virus is introduced, it produces a very small immune response in retinal cells, which causes them to produce a particular type of enzyme (again, variable according to indication). For indications outside of the eye, when the cells in question die they no longer produce the enzyme targeted at treatment. However, retinal cells do not “turn over” like other cells (i.e. the retinal cells we are born with are the cells we die with). This translates to a potentially lifelong treatment from just one therapy session.

So that’s how it works, where are we with trials? Let’s deal with the lead indications first. These are X-linked Retinoschisis (XLRS) and X-linked Retinitis Pigmentosa (XLRP).

The former occurs when a gene defects translates to their being a missing structural protein in the eye. This causes the retina to “delaminate” and leads to visual impairment. There is currently an ongoing phase I/II trial of AAV using a gene called RS1 targeting XLRS, with a primary endpoint of safety and a secondary endpoint of efficacy (as measured by visual acuity and visual field). The company expects to report preliminary data for this one before the end of the year, and due to its association with Biogen, anything positive could be a real upside driver for the company.

The latter of these two lead indications, XLRP, is related to a missing protein that causes night blindness and progressive deterioration of visual field span. The company has already completed a primate trial that showed promising results, and has a toxicology study slated for the beginning of 2016.

Further candidates include targeting Achromatopsia (ACHM) and AMD, with initial clinical data from a proof of concept trial scheduled before the end of the year for the former, and a target announcement for the latter scheduled during early 2016. For a more detailed breakdown, you can check out the company’s full pipeline available here (bear in mind this is slightly outdated and does not reflect the implications of the Biogen partnership in full).

From a financial perspective, and not including the $124 million scheduled to hit the company’s balance sheet as a result of the Biogen collaboration before it reports its next quarterly results, Applied Genetic Technologies had about $92 million cash at the end of March, 2015. Burn rate over the last few years has averaged out around $2.5 million, but this is likely to increase as the company moves its lead candidates into their respective clinical phases. Despite this increase, however, management has stated that current cash on hand should easily cover completion and data analysis of the ongoing trials for its XLRS and XLRP programs, as well as see through ACHM to prelim data.

So there we have it. A company with no debt and close to $100 million cash in the bank that is set to receive an influx of a further $124 million from a huge player in the space. With an additional $400+ million dollars earmarked as milestone payments for two of its lead candidates, and some wholly-owned candidates that have shown  preclinical promise, Applied Genetic Technologies looks to be one to watch, and may indeed offer a discount entry to a promising pipeline at current rates. Keep an eye on data scheduled for the end of the year as near-term drivers, and updates from the AGTC / Biogen collaboration slightly longer term.

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S&P Crosses 2100 for the 31st Time Since February

By
TradeCircle
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Ping Pong for the S&P 500

It’s been a game of ping pong at the 2100 line for the S&P 500 (NYSEARCA:SPY), and the ball is back in the upper court. The longest period of time any level above 2100 has been sustained has been 3 weeks from mid May to June. This is the 31st time that the line has been crossed, either up or down.

The move came a bit unexpectedly as a sudden surge of buying hit the markets for a whole hour between 10 and 11am pushing the index up nearly a whole percent in that time frame. Also suprisingly, the VIX, or Volatility Index, commonly known as the Fear Index, still edged up 1.5% despite overall stock gains.

Gold stocks outperformed today, with the majors (NYSEARCA:GDX) closing up close to 4% but gold (NYSEARCA:GLD) up only 0.25% by comparison. The rest of the commodity complex continued to underperform with oil closing the day below $42 and major oil ETFs like the US Oil Fund (NYSEARCA:USO) reaching new lows, with no relief in sight for the energy sector.

Leading oil stock Exxon Mobil (NYSE:XOM) ended the day with respectable gains despite the gloom, trading up 0.5%, unlike its competitor Chevron (NYSE:CVX), which lost 2%.

On the docket for tomorrow are housing starts, which will be published an hour before market open at 8:30am, as well as the CPI and Core CPI, with market analysts expecting a 0.2% gain in inflation. The CPI figure could be indicative of a possible September rate hike, as the higher the number is, the higher the chances of the Federal Reserve hiking its target overnight right by 25 basis points by then.

 

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Mixed Signals or History Repeating for the Market?

By
TradeCircle
-
Mixed Signals for the Stock Market

 

If you want to see a chart that looks a lot like tiptoeing on the edge of a cliff, take a look at the weekly chart of the S&P 500 (NYSEARCA:SPY).

S&P Weekly ChartThe blue line is the 50 day moving average. The last time it was tested was in October. It has now been tested five times in the last seven weeks. Its slope is also flattening, meaning the longer it is tested, the easier it is to break through the line.

How important is the 50 DMA? Here’s a look at a longer term chart of the S&P to gain a wider perspective on the 50 DMA and its correlation with bear markets.

Long Term S&P ChartFrom 1995 to 2000, the 50 DMA was tested 7 times on a monthly basis. The last 4 tests were spaced by about 6 months. After that, the 2000 to 2002 bear market began. The market finally regained the 50 DMA once again in mid 2003. During the bull market from 2003 to 2007, the 50 DMA was tested 8 times, with the last 3 tests coming within a space of 5 months. Then began the 2008 to 2009 bear market.

Since bear market bottom in March 2009, the 50 DMA has been tested 6 times, counting the 2011 break as one, and the weekly tests are becoming more frequent now. Only time will tell if this is the top for the current cycle, but it’s looking more likely by the day.

After yesterday’s largest turnaround by percentage in stocks for three years, equities fell sharply in the final hour of trading on high volume, signaling a probable lower open tomorrow.

Meanwhile, mixed signals are everywhere as the Atlanta Fed has forecast Q3 GDP growth at just 0.7%, as weekly unemployment claims continue to rival the 2000 trough. Then again, perhaps the signals are not so mixed, as that unemployment trough came one month after the 2000 NASDAQ (Nasdaqgm:QQQ) top was already in.

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Oramed is about to Revolutionize Diabetes Treatment

By
Roger Hannington
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glucometer_shutterstock_171265739

Data reported this month revealed  that the market for human insulin generated a little over $24 billion during 2014. Over the next five years, the data suggests a compound annual growth rate of nearly 13%, putting the 2020 industry valuation at $49 billion.

For a company with a market capitalization of less than $100 million, targeting a $50 billion market might sound overly ambitious. Not so, says Israel-based Oramed Pharmaceuticals Inc. (NASDAQ:ORMP). Oramed is not just targeting the human insulin market but is doing so with a treatment that, if approved, could be revolutionary. The company is developing an oral delivery insulin pill, initially targeting type I and type II diabetes. In doing so, it is in direct competition with Novo Nordisk A/S (NYSE:NVO), which at last close had a market valuation of $147 billion, and last year generated $13 billion net sales, $10 billion of which came from its diabetes related products. Despite this, however, Oramed is leading the race.

On June 30, 2015, the company announced it had enrolled its first patient in a phase IIb study of its oral insulin pill, which it calls ORMD-0801. The study will see circa 180 type II diabetes patients undergo 28 days of treatment at a minimum of 30 sites across the US, with the primary endpoints of evaluating both safety and efficacy of ORMD-0801. The company announced topline results from a phase IIa study of the same indication early last year, which demonstrated the treatment as being both safe and well tolerated. In addition, Oramed reported a reduction in glucose concentrations across patients in two dose groups across all three areas of testing (mean daytime, nighttime and fasting concentrations).

The way these things work is the FDA will often request a small-scale study (the phase IIa) to support the case for a wider scale evaluation. In this instance, a phase IIa study ORMD-0801 across 30 patient base on a seven-day timeframe. The goal now is to replicate the outcome of this result across the six times multiplied patient base slated for the already commenced phase IIb. Two things stand out as being attractive from an investment standpoint related to this trial. The first, that it has a 28-day administration period. In the grand scheme of biotech, this is miniscule. It should mean we get topline results within a maximum of 12 weeks – assuming everything runs smoothly. The second, that if the trial meets its endpoints, funding is already in place to carry ORMD-0801 through to approval. The company announced on July 7, that it was negotiating a deal with Sinopharm, the biggest healthcare group in China, and Hefei, a pharmaceutical investment business, there could be worth up to $50 million. Breaking this down, Sinopharm and Hefei will take a combined stake in Oramed worth about $12 million, and Oramed will give the two companies exclusive Chinese rights to ORMD-0801 for $38 million. $18 million due on completion, and 20 million due on the release of topline results.

Novo is yet to announce the commencing of its own phase IIb for its oral administration insulin equivalent. At the same time, Oramed has kicked off enrollment and is closing in on global licensing deals worth more than 50% of its entire market capitalization.

And that’s not all. As we mentioned in the introduction, the company is also investigating the treatment for a diabetes type I indication – with a phase IIa completed during Q3 last year. As with the type II indication, this study demonstrated safety and efficacy across a small sample size, and the company intends to expand this sample in a phase IIb during 2017.

Looking at things from a financial perspective, the company has no debt, cash and equivalents of a little over $26 million (not taking into account the potential injection from the Chinese rights deal) and a fully diluted share count of 14.5 million.

So what’s the takeaway here? Well, before we get carried away, we must point out that Oramed is a development stage biotech company that is yet to generate revenues from any of its candidate therapies. The road to FDA approval is littered with pitfalls, and can be unexpectedly costly. However, with this said, Oramed is about as risk mitigating as it can get. Financially sound, with what could be a revolutionary treatment in a multicenter, US-based phase II for and targeting a market worth many multiples of its current valuation – qualities not often seen at this end of the market cap scale.

More from Market Exclusive:

  1. What Is the Real Cost of AstraZeneca’s Eye Cancer Flop?
  2. Frost Closes SciVac Deal, A Potential Blockbuster Lineup in Hepatitis?

  3. Could This Treatment Replace Morphine in the US?

Story continues below

China Devalues Again, Market Very Confused

By
TradeCircle
-
Market Confused

The narrow 5% trading range in place on the S&P 500 (NYSEARCA:SPY) since February remains as the market ended the day unchanged after a wild session. Questions as to what if anything is driving market direction continue to intensify.

Yesterday, China’s 1.9% devaluation of its currency drove markets down across the world in confusion. Today, China’s second devaluation in as many days at first drove markets lower, but the Dow (NYSEARCA:DIA) clawed back up to exactly where it opened. Major support at 2040 on the S&P is now a crucial support zone in place for 6 months.

Gold (NYSEARCA:GLD) continued higher on its fifth consecutive day of gains, up to $1125 an ounce from a low of $1072, for a gain of 5% in a week. Miners in particular had a very strong day, with large cap gold miners like Newmont (NYSE:NEM) up 6.5% on the day. Goldcorp (NYSE:GG) and Barrick Gold (NYSE:ABX) were both up over 5%.

The gains in the metals were reflected by a strong selloff in the dollar index (NYSEARCA:UUP). A dollar selloff happening in the midst of a double Chinese devaluation belies particular weakness in the world’s reserve currency.

With stocks showing no particular sustained trend, day to day volatility seems to be the order of the day until either the uptrend is restored on new highs or the market breaks sharply lower. What ultimately happens may depend on whether the Fed raises interest rates in September as many are forecasting, or if they postpone the proposed first rate hike in 9 years to some other unspecified time.

Catalysts tomorrow include weekly initial unemployment claims due an hour before market open, as well as retail sales, with the consensus estimate at a 0.5% increase.

Stay tuned as the coil continues to tighten. The tighter the trading range, the more sensitive to incoming economic data equities may become.

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Market Inefficiency Has Created an Opportunity in Karyopharm

By
ME Staff
-
Biotech

At the beginning of this week, we learned that a number of patients in an ongoing Karyopharm Therapeutics, Inc. (NASDAQ:KPTI) had developed sepsis. On the news, premarket, shares dropped close to 30% and having recovered slightly during the US session on Monday, have since declined further to trade a little over 40% down on last week’s close. The information came as part of the company’s latest financial report, and relates to the mid-stage trial of selinexor – a therapeutic the company is currently trialing for the treatment of acute myeloid leukemia, or AML. Now, obviously, such a development can only be construed as a negative event for the company, but there is an argument that the market response we have seen is an exaggerated one. As such, they may be an opportunity to get in at a discount on what might just turn out to be, looking back, a minor setback for Karyopharm. Let’s look at why.

First, let’s address the details of the situation. This study in question is called SOPRA (Selinexor in Older Patients with Relapsed/Refractory AML), and kicked off across 40 centers in June last year. It is a 2 to 1 randomization trial that is blind against three alternative AML treatments – this basically means that a physician administers one of four treatments (one of which is selinexor) to a patient, but with a weighted proportion of 50% towards selinexor. Sepsis is pretty common in sufferers of AML, but obviously, any increase in sepsis prevalence would class as an adverse reaction to selinexor. Therefore, with the trial modelled as such, we would expect a sepsis prevalence in patients treated with selinexor twice as high as those treated with one of the alternative therapies. At the end of July this year, there had been reports of sepsis in seven patients receiving selinexor, compared with just two reports from two patients in the other arms. In other words, what should be 2 to 1 looks – at this time anyway – to be coming in at 4 to 1.

However, the key point here is that this is not the end of the trial. The company has amended its dosage to fall in line with a dosage issued during the phase 1 safety and tolerability trial, and continued otherwise as is. What was once a tailored dose of 55 mg/m² (body surface area) is now a standard 60 mg issue per patient – which translates to (on average) about a 25% reduction. So with this said, the question becomes can selinexor be effective at this reduced dose? Further, can the reduced dose translate to a reduction in sepsis events? And herein lies the opportunity. The company is currently undertaking a separate trial (phase 1) for selinexor in hematologic malignancies. As part of this trial, it is using two dose levels – and accordingly, these doses line up with both the previously used dosage (high) and the amended dosage (low) in the SOPRA study. In this second trial, so far at least, the lower dosage indication has not reported any out of the norm sepsis levels, and – even more importantly – interim data suggests patients are responding to selinexor at these levels. So, to reiterate the situation, Karyopharm has reduced the dosage of its SOPRA study to bring it in line with dosage levels in another of its studies at which patients look to be responding to treatment. In other words, yes there has been an adverse reaction at the current dosage, but this has now been reduced and (assuming we can get efficacy) this reaction will mean nothing longer-term.

Now, the question remains, if we are looking to enter at the circa 40% discount currently available on the assumption that the lower dosage will prove effective, when will be see vindication of this assumption? Well, in line with the dosage amendment, the company expects interim assessment by mid-2016. Topline data is expected during the last three months of next year.

So what’s the takeaway here? Well, markets have responded to the recent announcement in the same way they might respond to a trial being pulled completely when, in fact, the trial could very well go on to complete as expected – albeit at a lower dose. This has introduced an apparent inefficiency in Karyopharm’s market capitalization, and one that a risk-on investor might want to take advantage of.

More from Market Exclusive:

  1. What Is the Real Cost of AstraZeneca’s Eye Cancer Flop?
  2. Frost Closes SciVac Deal, A Potential Blockbuster Lineup in Hepatitis?

  3. AstraZeneca Drops Another $700 Million In Bid To Lead Oncology

Story continues below

China Devalues, Markets Fall, VIX Spikes, Gold Up

By
TradeCircle
-

In yet another sign that stocks are fragile, the S&P 500 (NYSEARCA:SPY) has lost nearly all the gains made yesterday on essentially no news. The big surprise today was China’s devaluation of the Yuan by 1.9% in what markets believe is an attempt to boost exports after abysmal data came out yesterday.

China’s move may actually be a prelude to being accepted into the IMF’s basket of currencies in what is termed Special Drawing Rights, or SDR. This would mark the Yuan as a reserve currency and place it in direct competition with the US Dollar and other major currencies. The reason that the People’s Bank of China (PBOC) may have made its move is to make the Yuan a more freely moving currency rather than maintaining a narrow peg. This is a prerequisite of the IMF for SDR status that China is known to want.

China’s ADR stocks, collected in the iShares China 25 Index ETF (NYSEARCA:FXI) are also down today, apparently not so pleased with the PBOC’s move.

With the S&P nearing technical support at 2040 and the narrow range since February continuing, chances of a waterfall decline have increased today.

Meanwhile, the Volatility Index (^VIX), the measure of fear on Wall Street, has spiked 15%, though is still quite low around 14, skirting its 52 week low of 10.9. For some perspective, the “Fear Index” shot up past 80 in 2008, and past 40 during the 2011 flash crash.

Gold (NYSEARCA:GLD) has responded well to the sudden spike in volatility, trading up for a fourth straight day along with other precious metals, suggesting traders are moving to safety as stocks continue to coil. The move to safety was confirmed by the spike in bond prices and corresponding fall in yields, with the 10-year yield down 4.5% today.

Each day will now become more important in determining if a larger correction is in order as the S&P approaches the 2040 level, which is likely the backstop to a wave of stop loss orders.

 

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