SuperGen’s stock gained 6.94% yesterday on moderately increasing market demand and closed at $1.85. Considering the high volatility of the price during the day shows that the jump can be due to some improvements in the technical indicators. A bullish MACD crossover might happen soon and it looks like the RSI is also going up. Some investors might have thus decided that the biotechnology stock has reached its lowest low this Monday and from there the direction can be only upwards.
At the end of last month it has been announced that Dacogen, a drug developed by SuperGen, approved by the FDA for the treatment of MDS and licensed for further development and sale to currently two other companies, failed in its Phase III testing on elderly patients with acute myeloid leukemia.
The following investor disappointment is understandable. As all of the company’s current products are still in early stages of development, the royalty payments on the sales of Dacogen are the only considerable source of current and potential revenues for the company, and the main reason for the increasing revenues over the recent quarters. Moreover, they have never been enough to cover the costly research and testing for the business to stay profitable for a long time.
Thus the main source of revenues has been the sale of common stock, which is likely to continue as the management expects more losses over the next few years.
In the mean time however, the company’s investments on the financial markets generated during the three months ended this March almost the same cash flows as the company’s operations. In this quarter, as well as in same quarter last year, buying marketable securities has been the only considerable investment done by the company, which also represents nearly 73% of all the assets SuperGen has.
