Taking Some Profits in Healthcare Name; Adding to Another Position

AcelRx Pharmaceuticals (ACRX)

Let's move a few pieces around the board, and try to manage ourselves to some kind of victory. First off, we've let AcelRx Pharmaceuticals (ACRX) trade above our price target for long enough without taking some money out of the name. That kind of violates our own discipline, so let's take some action.

There has still been no new news to support the recent positive volatility in the name, which has largely been due to prospects for the company's late-stage product candidate, Zalviso. Zalviso is a pre-programmed, patient-controlled analgesia device meant to allow hospital patients suffering from moderate to acute pain to self-dose while managing their pain. Zalviso is already approved in the European Union, and is still in the development stage in the U.S.

The firm's leading product candidate is still DSUVIA, which is still in Phase III clinical trials for the treatment of moderate to severe pain as well. We want to make sure that we profit, but we don't want to give up on some of this longer-term potential. This is what we are going to do:

Action: Sell 300 shares of ACRX at or around the pre-opening price of around $5.35 for a 147% profit. This will leave the portfolio long 700 shares at a price of around $2.16.

Price Target: For the balance of this position, we will now raise our price target to $6 from $5, exposing the portfolio to upside possibilities that could follow along with progress made on both Zalviso and DSUVIA product developments.

Hudson Technologies (HDSN)

If you have been following the story, you know that in late September this name suffered badly in response to a couple of analytic pieces that were published at Seeking Alpha. In fact that story took one of our winners, and put it 12% in the hole. The gist of that analysis was basically that 25% of R-22 being purchased by reclaimers such as HDSN is cross-contaminated with other gases. The tough thing is generally that "cleaning the gas" is expensive, and will cause HDSN to miss guidance on revenue estimates.

Now, the glitch in the story is analyst Gerry Sweeney of Roth Capital, who placed a "Buy" rating on the stock just last week as well as price target of $11. Our price target, before all of this news started moving around, had been $12 for comparison's sake. Sweeney is quoted as saying:

“We recently had the opportunity to sit down and speak with a couple private reclaimers to discuss the current market for R-22, mixed gas impacts and overall prices and expectations. Post conversations we continue to believe mixed gas is not a major hurdle, process technology exists to handle mixed refrigerants, and margins may benefit.”

Interesting. Who's right? We don't really know. I would love to give this name that I am long in my personal account a chance to fight its way back from a negative editorial piece if the concerns raised are indeed misplaced. This is my thought. We are raising a little dough from the partial sale of the ACRX (about $1,600). Let's add a little here (not too much), just to lower our average cost, and try to manage our way to something close to breaking even on the name, if the stock rallies into earnings, which are set for Nov. 8.

Action: Purchase 200 shares at or around last night's closing price of $7.63, knocking more than $0.40 off of our net effective cost, and increasing the long position to 500 shares.

Target Price: Forget $12, forget $11. Our new target price is $9, and we may pull the trigger early. This is just capital management. I am not in love here.

DISCLOSURE: At the time of publication, Guilfoyle owned shares of HDSN in his personal account.

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