What a week it was for the BioRunUp Fund. If you dabble in the markets regularly, it was hard not to hear about Aquinox Pharmaceuticals (AQXP) on Friday. The stock opened up about 50% and continued higher all day, closing up 480% from the previous day.
So, what happened?
Aquinox develops AQX-1125, a small molecule activator of SHIP1 being tested in chronic obstructive pulmonary disease, or COPD, bladder pain syndrome/interstitial cystitis, or BPS/IC, and atopic dermatitis. The Canadian company IPO’d just over a year ago, in March of 2014, at $11.00 per share and had bounced in the $7 to $12 range for the past year as investors waited for proof of concept data from the first two phase II studies of AQX-1125, in COPD and BPS.
Both trials failed to meet their primary endpoints this spring and summer. The stock was punished, and AQXP traded below the company’s cash position for the remainder of July, at around $1.75.
That changed Thursday night. With Aquinox’s second quarter earnings, management presented a wider dataset from the phase II BPS trial, explaining that the trial hit almost every endpoint (secondary) but the primary – reduction in average pain score after 6 weeks of AQX-1125 vs. placebo.
That was enough to get the stock moving on Friday morning. AQXP opened up 50%, almost trading at cash value. But the real recipe for AQXP’s 480% move: a combination of a slow summer Friday, the stock’s low float (some 5 million shares freely trading), and recurrent short covering. A tiny supply to meet growing demand was the perfect setup for a face-ripping move from AQXP.
At $10.42, where AQXP closed on Friday, the stock has recouped all of its losses from the two trial failures. Bulls will argue that AQXP is sitting on a efficacious, albeit unproved, asset that addresses an unmet need and sizable market in BPS/IC. Bears will point to the trial’s top-line failure, and that small pain studies don’t often produce the same results twice.
That’s biotech for you. Though we suspect this kind of move won’t to be sustained in the short-term, AQXP exemplifies the wild nature of the small- and mid-cap cap biotech space, where the BioRunUp Fund - and our subscribers - thrive.
In July we explained to subscribers why $400 for the iShares NASDAQ Biotechnology ETF (IBB) could serve as a temporary top. Sure enough, biotech has pulled back almost 9% after briefly touching this all-time high, and on Friday we explained what’s going on in biotech coming away from quarterly earnings last month. Market participants anxiously await confirmation from the Fed in September that a long-anticipated interest rate hike IS on its way, and this week seemed to be a typical risk-off move in front of the Friday jobs report.
In the same note, we updated on some of BioRunUp Fund’s current ideas, including bluebird bio (BLUE), Esperion Therapeutics (ESPR), and uniQure (QURE).
We anticipate our future trades in these and other biotech equities will significantly reward our subscribers.
