Good Monday all. A new week means new ideas and another big opportunity to make money in the market. We mentioned early last week we've been noticing biotechs have been breaking out recently and sure enough, the whole sector continued its move higher last week as evidenced by the impressive move in the NBI (NASDAQ Biotechnology Index). As a matter of fact, the NBI is crushing virtually every other major index that exists which tells us trading and investing in biotechs is not only alive and well, it's leading the charge.
For educational sakes, the NBI consists of roughly 120 select large NASDAQ Biotech Stocks. It's a great barometer for getting a good feel for how big money is flowing in and out of the biotech sector. Based on the daily chart of the NBI I've included here, well... you can see for yourself. It's running like a banshee so let's go with it and not ask questions.
A big part of having long-term success in the markets is knowing when and where big money is flowing... early and often. This was the foundation for last Tuesday's newsletter suggesting now is an excellent time to play in the biotech space so let's stick with it.
Familiar with our recent coverage and impressive returns of DexCom (DXCM)? I've got another stock at the other end of the biotech spectrum in the penny stock space that may provide returns that would completely trump that of our DXCM idea.
Dealing with the Deadly Threat of Diabetes and Terrorism
I got a phone call from a colleague a few weeks ago asking me if we'd be interested in taking a look at covering a small biotech tech Company believed to be doing some ground breaking and fascinating things for diabetics, in addition to helping our Country deal with terrorist threats on various levels. To be honest, my initial response was... "huh?" Then, after digging in a little bit I determined that this little penny stock really could be on the verge of something very meaningful on both fronts.
I reviewed the Company's business model and technology along with the stock's chart and it appears the stars may be aligning here. What makes it so exciting is when a penny stock's chart starts to look good and their technology pipeline presents some promise, things can get very interesting very fast. With that being said, we're going to being launching a new Featured Stock at the close of market today, PositiveID Corporation (PSID).
Trading at roughly $.15 cents per share and roughly a mere $8M market cap, there's plenty of room for PSID's stock to run in my opinion and if you're as interested as we are in getting out in front of small stocks on the verge of getting a lot of attention, then I definitely wouldn't wait around on this one. More on that below... but first let's have a look at the value proposition of what PositiveID Corp. has to offer investors.
PositiveID Corporation develops unique medical devices and biological detection systems focused primarily on diabetes management, rapid medical testing and airborne bio-threat detection. The Company operates in two main divisions: HealthID and MicroFluidic Systems. The HealthID division develops unique medical devices, focused primarily on diabetes management. Its MicroFluidic Systems subsidiary develops airborne bio-threat detection systems and rapid clinical diagnostic systems.
Division 1 - HealthID
In the best interest of providing a full understanding of what PositiveID does and it's enormous potential, let's break down their two divisions. The first, HealthID, consists of its iglucose™ System, Easy Check™ a breath glucose detection device and its GlucoChip™ technology. Aside from the obvious health related issues 25 million diabetics face in this country, there are two main issues yet to be solved that can very well change their lives - how they test their glucose levels and the consistent charting and monitoring of those levels. PSID's HealthID Division addresses both.
iglucose provides a breakthrough in diabetes management by automatically and wirelessly communicating blood glucose readings and creating logbooks and trend reports without the need for a mobile phone or manual entry. At the user's consent, the data stored in the iglucose diabetes management portal can be shared automatically with family members, caregivers and healthcare professionals via text message, email or fax. There's a whole site dedicated to their iglucose system with plenty of information, videos and much more located at: http://www.iglucose.com/.
It gets better. PSID's Easy Check™ breath glucose detection device, which is currently under development in Israel, is a non-invasive breath glucose detection device that measures the level of acetone in a patient's exhaled breath and correlates that acetone level to a measure of blood glucose. The Easy Check technology is based on a patent-pending reagent cell that mixes a patient's exhaled air with a proprietary chemical compound, triggering a chemical reaction. The reaction is measured and software in the Easy Check device then interprets the measurement and correlates the patient's acetone level to the level of glucose in the body. This could eliminate a patient's need to prick his or her finger multiple times per day to get a blood sugar reading which has huge revenue potential upon approval. Based on successful preliminary laboratory tests that validated its proprietary technology, PSID continues its development of Easy Check. There's a full white paper, product photos and more information on Easy Check here: http://www.positiveidcorp.com/products_easycheck.html.
PSID's third proprietary technology, GlucoChip™, which took the capabilities of RFID implantable microchips beyond simple identification. PositiveID received a patent in 2006 for an "Embedded Bio-Sensor System," which combines an embedded bio-sensor system on an implanted RFID microchip. One potential application of this bio-sensor system is an implantable, bio-sensing RFID microchip that measures glucose levels in the body in real time.
To advance this application, PositiveID partnered with RECEPTORS LLC, an expert in the field of proteomics and the development of artificial receptors, to develop a prototype-level glucose sensor to use in conjunction with an implantable, bio-sensing RFID microchip to measure glucose levels in the body. RECEPTORS has successfully completed Phase I and Phase II of the project. Exciting and ingenious. Again, more on PSID's GlucoChip here: http://www.positiveidcorp.com/products_glucochip.html.
Division 2 - MicroFluidic Systems
PositiveID's MicroFluidic Systems division, which operates as its MicroFluidic Systems ("MFS") subsidiary, develops sample preparation and biological detection systems. MFS began developing complex microfluidic systems to perform sample processing and purification for the Defense Advanced Projects Agency (DARPA). It then developed a similar system, including a thermal cycler for PCR analysis for the US Army's Edgewood Chemical and Biological Command (ECBC). The division consists again of three proprietary technologies, M-BAND, Dragon Fly and its Multiplex BioThreat Assay.
The Microfluidics-based Bioagent Networked Detector (M-BAND) developed by MicroFluidic Systems (MFS) is a bioaerosol monitor with fully integrated systems with sample collection, processing and detection modules. Each module is fully functional and adaptable. M-BAND runs autonomously for up to 30 days, continuously analyzing air samples for the detection of bacteria, viruses, and toxins with results in as little as two hours. Results from individual instruments are reported via a secure wireless network in real time to give an accurate and up to date status for fielded instruments in aggregate. MFS has implemented its own biological assays. In Layman's terms? They can detect airborne threats. Learn more... knowledge is power: http://www.positiveidcorp.com/products_mband.html.
MFS' Dragon Fly is a series of microfluidic cartridges for biological sample processing and detection. Examples include differential extraction cartridges, sample processing and amplification for biodefense applications, and clinical sample processing and detection. The microfluidic cartridge approach demonstrates various applications such as: environmental bacteria (e.g., E. coli), biothreat agents, clinical samples (Human Papilloma Virus), antibiotic resistant bacteria (e.g., MRSA) and forensics such as differential extraction. More on Dragon Fly here: http://www.positiveidcorp.com/products_dragonfly.html.
MFS' third technology has developed the first commercially available, multiplex bio-threat assay (MBA) for the detection of up to six bio-threat organisms on the CDC Category A and B lists. The Bio-Threat Assay Kit provides the added specificity and simplicity by using genomic and multiple plasmid signatures to confirm the presence or absence of an organism. The multicolor combinatorial approach allows a user to rapidly screen a biological sample for the presence of five bacteria and one virus in only three simultaneous reactions. An additional benefit to the multiplex kit is a very significant reduction in cost per test when compared to running the samples in a singleplex format. Check out the MBA site here: http://www.psidmba.com/.
Analyzing the Chart and the Opportunity
So here's the skinny on PSID now that you have a full understanding of what they do and all of the potential that the Company's technology represents. From a fundamental prospective, there's a reason PSID is a penny stock. Like many biotechs and new technology based stocks, they struggle to keep things going and are always usually relying on their next financing to keep the dream alive. However, once a Company can work their way through it all and receive FDA approval or land a major contract, it can change the landscape of the stock overnight.
InPSID's case, an approval or major contract on either their HealthID or MFS line would likely send this stock skyrocketing. Remember two things here... the Company only has roughly an $8M market cap so there's basically there's plenty of room for potential upside as a result of its currently low market cap. This is extremely important as there are hundreds if not thousands of penny stocks with overly inflated market caps out there with no chance of fundamental price appreciation built into their stocks. Secondly, if you see what I see here, PSID has some extremely compelling technology that if any of the six technologies the Company is currently working on makes it into either the large pharma, medical device or homeland security space, shares of PSID could very quickly graduate from penny status.
As for the chart, you all know how much we love charts here at SCN. We are firm believers in fundamentals but if a Company has decent fundamentals and we don't like the chart at all? We're out.... more so when it comes to small stocks and PSID's chart based on current levels, presents an excellent risk/reward opportunity. I've included a daily chart here for your review.
You can't see it on the daily chart but shares of the stock going back to 2006 were as high as $10 per share. Just as recently as November of last year, the stock traded to almost $.30 cents. How would you have liked to own it at $10 or even $.30 cents for that matter? Enough said. PSID currently trades very close to its all-time low around the $.15 cent level. What makes the chart even more compelling is the stock appears to have found a base. Any significant news or corporate developments may likely catapult the stock to its 200 day moving average of about $.25 cents. That would equate to about a 66% return. That is well worth the risk if you ask me... but it's your call.
Like with most stocks we cover here, we believe PSID is going to start getting the attention of other penny stock players in short order so it's better to be in now than to chase it later and then wonder if we're priced in right. I like our chances here so let's get it on...
We'll be making PSID a Featured Stock this afternoon, so as usual you'll be able to post up your comments, read what others are saying and review more info from other SCN Contributors and Members in the days ahead. The Stock HQ Hub for PSID located here will reflect our Featured Stock status at the close of market today: http://www.smallcapnetwork.com/PositiveID-Corporation/s/quote/p/s/PSID/.
Happy Trading & Investing. See ya'll tomorrow.