Last Updated on May 12, 2019 by Sultan Beardsley
This stock biotech stock came across my radar while doing my weekend review of stocks to watch. Today the stock showed to have great potential as a swing-trade candidate. Ovid Pharmaceuticals (Nasdaq: OVID) specializes in the development of medicine to treat rare neurological disorders. The company has 3 products (OV101, OV935, and OV329) in the clinical stage targeting 4 different neurological conditions (Angelman Syndrome, Fragile X Syndrome, Developmental and Epileptic Encephalopathies). The most advanced compound is OV101 which is getting ready to enter phase 3 of development this year for the treatment of Angelman Syndrome in Adults and Adolescents (STARS clinical trial). OV101 is also in phase 2 clinical trial (ROCKET) for Fragile X syndrome.
Angelman Syndrome is a rare neurological disorder affecting approximately 1 in every 15,000 people and is caused by a genetic mutation. Presently, there are no medical treatments available other than anti-seizure medications. Individuals with Angelman Syndrome commonly experience issues with balance, mental retardation, speech impairment, seizures, and anxiety.
The past 12-months have not been kind to OVID. In May 2018 OVID traded around $9 per share. Since then it has seen prolonged periods of steady decline and multiple sharp sell-offs.
On August 6th, 2018 OVID reported positive top-line data from its phase 2 STARS clinical study testing the safety and tolerability of OV101 in adults and adolescents with Angelman Syndrome. Although the study hit its primary endpoint of having a favorable safety and tolerability profile OV101 failed to significantly improve patient sleep, gait, and balance compared to a placebo. As you’d expect OVID took a nose dive from ~$11.0 to below $6.0 instantly. OVID continued downward until a second steep sell-off triggered by a public offering of preferred and common stock took the share price from ~2.50 to $1.70.
A deeper dive into phase 2 STARS data supported OV101 as a viable candidate for the treatment of Angelman Syndrome. Researchers found that OV101 15 mg improved sleep and motor parameters among adults and adolescents. Ovid stated in the press release that they believed these changes contributed to the statistically significant difference improvements seen in the “clinician-rated clinical global impressions of improvement (CGI-I) symptoms overall in the 15 mg once-daily OV101 dose group compared to placebo after 12 weeks of treatment, as reported in the topline data from the STARS trial on August 6, 2018. CGI-I is a global measure commonly used in clinical trials that allows the clinician to capture improvement in a constellation of clinical symptoms”. Despite all this, the stock continued in its downtrend.
Nonetheless, OVID is scheduled to begin a phase 3 clinical study for OV101 as a treatment for Angelman Syndrome in the 2nd half of 2019. On May 7th, 2019 the company is presenting phase 2 STARS data at the American Academy of Neurology.
The average daily volume almost doubled today giving the MS Team a potential easy scalp 10-20%. We are looking to enter on an intra-day pullback 4/30/2019 during the ‘Medicare for all’ volatility. I will be buying in increments of 1/3’s.
I am entering tomorrow because I see overall sentiment being bullish in the biotech sector and going to use the Medicare for all volatility to our advantage in hopes of a slight pullback giving us optimal entry for OVID.
Recently, I’ve found other Biotechs to have a similar formation with stock price breaking out of a wedge after being capitulated. The breaking of wedge indicates a bullish trend reversal, with the top of the wedge now acting as support. Elliott Wave theory and key Fibonacci ratios indicate a continued move up.
Levels of resistance I will be watching for are in the range of $2.20- $2.46 (see the text on the chart) where I will be taking profits.
Although the share price has already risen 15% from its low of ~$1.77 a couple of weeks ago I anticipate there will be more upside into and after the data presentation. My entry target is around $1.80-2.0 and my profit exit (i.e. price I aim to sell at) is $2.20-2.50.
My thought process is that OVID is extremely beat up at this point after top-line phase 2 failed to impress and a public offering. New traders flocking in for the catalyst and investors still holding OVID should boost the share price up farther this week. Moreover, OVID has an extremely low float of 22.65 million shares meaning it does not take that much volume to move the share price; although I welcome all the volume OVID can get.
One concern I have is short selling was unusually high today. Around 65% of the volume today was attributable to short-sellers. It’s not unexpected being that OVID is a small-cap biotech company and as such is an easy target for short-sellers. Still, the uptick in short volume is not something I like to see. On the plus side volume, today was nearly double the 10-day average (673.80K) at 1.12 million shares traded.
The data abstract for the conference will be released on Friday. My plan is to buy in the next day or so at a favorable entry price and sell as the share price recovers into the event. If OVID does not move sufficiently or in the right direction, I may hold into the conference.
It’s possible I do not play it at all. It all depends on the technical setup remaining favorable and general healthcare market sentiments. Remember, Tuesday the house is met to discuss Universal Healthcare which has been hurting biotech investors. If I enter MS Members will get alerted so keep an eye on the premium forum. My price target to sell is $2.20-2.50 (+10-30% gain). Not too shabby for a couple of days!
I have no position in OVID by I may open one in the next 24 hours.