-- Purchase 300 shares of AcelRx Pharmaceuticals, Inc. (ACRX: Nasdaq) at or around the opening price of $2.15, to make a long position of 1,000 shares, making up around 0.96% of the portfolio.
The portfolio took a shot to the teeth for the second day in a row Thursday morning. After Hudson Technologies (HDSN) lowered guidance on Wednesday, putting a 15% hurt on that name, AcelRx Pharma received some troubling news from the Food and Drug Administration (FDA) early Thurdsay morning. We will also have to address HDSN, but I believe that can wait at least a little bit longer at this point. Perhaps we see some relief as that name heads into earnings are due on Nov. 8.
ACRX closed last night at $5.35. That price had our portfolio up 147% on this position. We had recently sold 800 shares in two tranches at an average price of $4.68. Our average point of entry in the name is $2.16. That's the good news, that we had reduced the position by more than half at what now look like very good prices.
In the pre-opening trading session, I saw this name trading around $2.15. Why are shares down so much in the early going? The company received a complete response letter (CRL) from the FDA that stated AcelRx's pain treatment drug Dsuvia could not be approved in its current form. The FDA explained that although the safety database was suitable in a number of patients, additional data would be required on at least 50 patients. The FDA also recommended changes be made to the directions of use for the drug. As you know, the stock had recently taken off on expectations of a far different outcome.
I am sorry, gang. I know this hurts. I really thought that we were looking at $6.00 on the out for the last 700 shares. Now the ballgame becomes all that much more complex. Today looks like it could be the worst single-day selloff since the stock went public in 2011. CEO Vincent Angotti said publicly, "We believe the recommendations stated in the CRL are manageable and plan to fully cooperate with the FDA."
The firm will request a meeting with the FDA to discuss the letter and to confirm plans to resubmit the New Drug Application (NDA). I like the attitude. Just understand that this is a major setback, and not likely to see a quick turnaround.
If the stock hits $2.16 (our average cost), we can get out flat on this 700, put the stock to bed and still show a nice overall profit for the name. I do not blame you if you go that route. It truly is tempting. For me... I am kind of an aggressive guy, and when I get ticked off, I tend to look for a way to fight back.
You all saw how I tried to manage Inovio (INO) . We could buy back the 800 shares having successfully traded out and back in for some nice dough and re-establish our original size at approximately our original net cost. That is tempting as well.
ACRX reports earnings on Oct. 31. I would like to buy back the shares here, but I am fully cognizant of the fact that this has to impact earnings projections. Without earnings comes no revenue. Without revenue comes dilution. We have sung that sad song before, especially with biotech-type stocks. I am going to buy back 300 shares on today's puke-athon, and keep my powder dry on 500 shares just in case Angotti tries to shove a secondary offering down our throats.
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