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Biotech Stock Mailbag: Research Backs Shorting Micro-Cap Cancer Drug Stocks

Investors and traders took to Twitter Wednesday -- @DrEdGD, @pennystockUSA, @WilliamPShelley, @TCMoore02 -- seeking answers to Amarin's slumping stock. What I found was a Reuters story published Tuesday night rehashing concerns that Amarin will have a hard time finding a buyer for the company due to patent problems.

It's unrealistic to believe Amarin can land a buyer or partner for AMR101 so soon, but those expectations are out there in the market, and every day that a deal isn't announced causes more agitation. Anguished, impatient, shortsighted traders sell Amarin stock. Patient Amarin investors hold on and aren't worried -- yet.

Amarin bears are feasting on the fear, but I do I respect the concerns raised about the AMR101 patents and the drug's New Chemical Entity (NCE) status, both of which ultimately have an impact on the drug's market exclusivity and peak sales potential.

These are unsettled issues, no denying that. Even if you believe the patents will be granted and FDA will give NCE status to AMR101 (as I do), it's entirely possible that potential Amarin suitors are nervous and therefore waiting for more clarity before making offers.

AMR101 is now in the hands of FDA reviewers. Expect a standard, 10-month review, so a late July 2012 approval decision.

One more thing to say on Amarin: Management does a very poor job communicating with investors. Instead of countering its critics and discussing the issues openly, Amarin's management says nothing, does nothing, or at a minimum, communicates through private meetings with analysts and large shareholders. Amarin could erase a lot of the uncertainty -- and help its stock price recover -- if it would just start communicating with all investors more fairly and openly.

Quick update on Cyclacel because there really isn't much new to add since I last wrote about the slumping stock in August.

Yes, Cyclacel CEO Spiro Rombotis bought some stock this week -- nice but the insider buy is pittance next to the much larger block of stock sold by the company's largest shareholder, Special Situations Fund, likely for tax-loss reasons. [Cyclacel is down this year, so hard to blame these guys.]

Cyclacel was cheap in August and it's cheaper today, but as I said back then, cheap doesn't mean buyers step in when everyone knows the company needs to raise more cash, the capital and governance structure is still a mess, longtime shareholder support is ebbing, and meaningful clinical catalysts are long ways off.

Cyclacel is a mess and I'm still waiting to hear from someone with a plan to fix it.

--Written by Adam Feuerstein in Boston

>To contact the writer of this article, click here: Adam Feuerstein.

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Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.
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