It isn't profitable. It doesn't have any revenue. It doesn't have any Wall Street coverage, and, by its own account, hasn't said anything new in about four weeks. Yet Northfield Laboratories ( NFLD) continues to attract investors' attention, illustrating how the dream of creating an artificial blood substitute whipsaws a stock. On March 4, for example, Northfield didn't say anything or file anything with the Securities and Exchange Commission, yet the stock jumped 25.1% on trading volume four times higher than the previous day. On March 5, again, without any developments, shares jumped 13.3% on even higher volume. And on March 8, as the news vacuum continued, investors drove shares up 22.7% in intraday trading -- then bailed so quickly and vehemently that the stock closed down 4.6%. For the next week, the stock fell 20%. In recent days, the stock is up nearly 20%. It's enough to keep the Internet chat rooms busy, but this volatility is common for a company whose shares were trading in the low $30s just four years ago and were stumbling below $4 nearly two years ago. Other searchers for blood substitutes have suffered from similar paroxysms of share prices; in many cases, the shares haven't bounced back.
Momentum vs. Fundamentals
Despite its gyrations, Northfield appears to have a bit more momentum than its chief competitor, Biopure ( BPUR), even though Biopure has a blood-substitute application pending before the Food and Drug Administration and Northfield is just starting its phase III clinical trial, the last research step before seeking FDA approval. But that last step can be tricky. Even though Biopure completed its phase III research, the FDA has asked for more information, records and tests on animals. That has caused a significant delay in Biopure's expectations of getting its blood substitute approved quickly. The SEC may file a civil action against the company, and Biopure's stock has lost 85% of its value since early August.