Biotechs are an aggressive play for speculators who want to capture huge spikes in value. Many investors shy away from this sector, but for the risk-tolerant, it’s a good time of year to make a move
ViroPharma (NASDAQ:VPHM) is a current Trader’s Advantage holding that is doing especially well — so well, in fact, that I plan to leverage its performance and recommend some call options on top of the stock.
What’s neat about it is that the success isn’t tied to any earnings reports, as the earnings report is already in the rear-view mirror. ViroPharma’s annual autumn ascent is typically is tied to an analysts’ meeting that the company has in the second week of September. There’s usually an update and, for years, the update has been positive.
But let’s take a step back for a second and learn a little more about ViroPharma. It’s a Pennsylvania company that specializes in therapies for genetic diseases and sells its products directly to wholesale drug distributors.
In addition to drugs that are currently in production, ViroPharma has two products that are approved by the FDA and are now on the market: Vancocin, which treats two bacterial infections of the lower gastrointestinal tract and Cinryze, an angioedema drug. The company forecasts worldwide net product sales of $450 to $475 million and just increased guidance for net sales of Cinryze to $320 million to $335 million.
VPHM shares have been among the best in the entire biotech industry through its life as a public company — and particularly since 2009, as you can see in the monthly chart below.
It dipped down in early August, but is now charging back up again. Based on that uptrend, ViroPharma is a clear momentum play. I have an initial target of $27.30 for the stock, but that will likely be revised upward.
Jon Markman operates the investment firm Markman Capital Insights. He also writes a daily trading newsletter, Trader’s Advantage, and a long-term investment service, Strategic Advantage. Check out his Top Stock for 2012 here.