A Biotech Stock With Big Upside Potential
The Fed’s latest round of quantitative easing, QE3 or QE Unlimited as some are calling it, has lit a fire under the stock market. The S&P 500 is up a hefty 3.6% so far this month.
And the mega-cap index is now trading at levels not seen in nearly five years.
What’s more, investors are piling into stocks with higher risk profiles. Many believe riskier stocks will provide the biggest profits in a QE3-fueled rally.
A perfect example of this phenomenon is the recent run-up in biotech shares. A favorite high-risk sector for stock investors, biotechs have gained nearly 8% since the first of September.
And we still have one more week to go!
While a good number of biotechs are rallying right now, one in particular is proving quite popular with investors. That company is none other than Merrimack Pharmaceuticals (MACK).
Take a look at the chart…
On Friday, MACK surged more than 18% intra-day to $11.11 per share. And although some investors took profits at the top, the stock finished the day with an enviable 9.5% one-day gain.
Not too shabby.
What’s more, the stock’s enjoying its best month since the company’s initial public offering (IPO) in March. So far in September, MACK has gained a stunning 30%!
No question about it, QE3 is a major driving force behind the rally. However, there’s more going on here than just blind-buying by starry-eyed investors.
But before I tell you about an important upcoming catalyst, let’s first take a look at the company.
Merrimack Pharmaceuticals operates on the cutting-edge of biomedical research. With its proprietary Network Biology R&D system, the company’s at the forefront of developing revolutionary new drugs for cancer.
Network Biology is an inter-disciplinary approach to drug discovery and development.
It focuses on understanding how the complex molecular interactions that occur within cell signaling pathways – or networks – regulate cell decisions. More importantly, this technology platform helps Merrimack researchers understand how network dysfunction leads to disease.
Now, getting back to that potential upside catalyst…
Investors are most likely snapping up shares of MACK in order to get in ahead of important, upcoming clinical trial results. The biotech is expected to release top-line results from several phase 2 studies of MM-121 over the next 12 months.
In fact, some data could be available before the end of this year.
Of course, biotechs often trend higher going into the release of clinical trial results. And positive data can send a biotech’s shares soaring to new heights.
So, what is MM-121, and why are investors excited about it?
The drug is a human monoclonal antibody designed to inhibit the growth of cancerous tumors. What’s more, MM-121 is also expected to overcome a tumor’s resistance to chemotherapies.
MACK and its partner, Sanofi (SNY), are currently testing MM-121 as a treatment for several types of cancer, including lung, breast, and ovarian cancers. If results from the mid-stage trials are good, MACK just might have a potential blockbuster drug on its hands.
Bottom line…
MACK is the kind of risky biotech that speculative investors love to own. It has a broad pipeline of drugs in development, plenty of money to fund its clinical trials, and a major pharmaceutical company for a development partner. The upcoming trial results could be the spark that sends MACK into the stratosphere.
Profitably Yours,
Robert Morris
Category: Stocks
