Last Updated on January 15, 2019 by Sultan Beardsley
MS Money Moves Swing thesis for AcelRX Pharma (ACRX) published last week in our “Swing Alert“article played out nicely. ACRX spiked ~70% from $2.90 to $4.92 in the last 5 trading sessions. The upward momentum was fueled by engulfment of oversold shares and a favorable FDA Advisory Committee Meeting (ADCOM) where the panel voted 10-3 recommending DSUVI for approval in the U.S for treating moderate to severe pain in a medically supervised setting. .
In the weeks leading up to the stocks low point there was a fearful sentiment regarding ADCOM that triggered a panic driven sell off and provoked a bear attack. Seeking Alpha, a supposedly professional outlet for actionable investment insight, did not help by needlessly releasing a report bewaring investors about ACRX’s 2017 CRL driving it down to $1.5 briefly . Collectively, it was the perfect ‘short-storm’, yet also the perfect buying opportunity for savvy, pragmatic investors. Hopefully, many of you followed out lead and bought the discounted shares. Now it is time for the closing move. There are two strategies that we believe are best for maximizing profit. I’ll share both and then in tell you which strategy we will be doing.
- Sell all or most your shares at the peak of Monday’s spike. How do you know what the peak will be? It’s impossible to know exactly, but in our opinion it will be between $7.38-$9.84. So, in other words if the ACRX jumps 50-100% 4 hours into the trading session, we will be unloading all our shares to lock in profits. Why not keep holding? You could, but there is bound to be a pull back and you never where the price will land in a day or week from now. So, we like to take our profits, and re-enter later towards the PDUFA run-up. Remember: It is all theoretical profit until you sell.
- Buy more shares immediately when the market opens Monday and sell at the peak of the day securing profits. If you choose to go this route it is extremely important you sell and do not hold since you would be increasing your overall cost basis by buying additional shares at a higher price. Thus, increasing your risk level.
We will be going with strategy number 2. Why? Because it is the most profitable. We anticipate making around a 170% gain on our initial investment last week and then another 50-100% on the shares we buy monday morning.
Why do we think ACRX will jump 50-100%?
Product approval for any small cap biotech company is always huge because approval equals revenue, and revenue equals money to pay talented employees to develop and commercialize more products, which generate more revenue.
The ADCOM vote of 10-3 in favor of approval reflects that ACRX sufficiently addressed the FDA’s concerns presented in DSUVIA’s initial CRL. With the U.S facing a major opioid epidemic alternatives to classical pain relievers like Morphine, Vicodin, Oxycodone, and especially Fentanyl, are in high demand by medical practitioners. Over 105 million adults are admitted to hospitals for short-term stay or outpatient procedures annually. That translates to a projected $1.1 billion in revenue from DSUVIA sales in the U.S alone. In Europe 142 million patients experience moderate to severe pain after surgery in hospitals or while in an ambulance. 110 million people are admitted to the emergency room and experience various degrees of pain. Bottom line is when you factor in the European market DSUVIA(O) can earn well over $2 billion in sales annually conservatively extrapolating from ACRX’s estimation of U.S sales. Looking at the company’s latest 10-Q, that would essentially double their revenue. And, let us not forget about Zalviso which is approved in Europe, and Sufentanil approved in the U.S. already generating income. Zalviso is through phase 3 and ACRX will be filing an NDA for it in the U.S soon. There is also bound to be a short squeeze that accentuates the upward price momentum.
Last but certainly not least, ACRX landed a contract with the Department of Defense (DOD) to replace morphine. God only knows how many billions that will generate them long term. And, it speaks volumes to the utility and efficacy of DSUVIA if the DOD was willing to help fund its development and now are gearing up to adopt it.
Good Luck to all and never hesitate to contact us with questions or concerns.
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