NEW BULLISH Plays
Intrexon Corp. - XON - close: 50.16 change: +0.66
Stop Loss: 46.90
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on March -- at $---.--
Listed on March 07, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 1.1 million
New Positions: Yes, see below
Why We Like It:
We are quickly approaching a world where science fiction is becoming a reality. One company leading the charge is Intrexon (XON). They are leaders in synthetic biology.
What is synthetic biology? According to XON's website, "Synthetic Biology is the engineering of biological systems to enable rational, design-based control of cellular function for a specific purpose. The programming of DNA and reformatting of genetic circuitry within cell platforms has created a paradigm shift whereby the analysis of biology is being supplanted by its synthesis. This advancement has the potential to significantly impact approaches relied upon for some time across a variety of industries. The ability to create and modify 'organic' materials on increasingly larger scales has occurred with a number of breakthroughs in genetic engineering including automated DNA sequencing, DNA synthesis, the advent of computational bioinformatics, and the creation of genetically modified organisms."
One man who knew a thing or two about technology was Apple Inc. founder and technology icon Steve Jobs. Mr. Jobs said, "I think the biggest innovations of the 21st century will be at the intersection of biology and technology. A new era is beginning."
Biotech stocks were market leaders last year and that relative strength has continued into 2015. This group has been so strong that I've been hearing a some speculation about a bubble in biotech stocks the last couple of weeks.
You may not be familiar with XON since the company has only been public since August 2013. The company describes itself as "Intrexon Corporation (XON) is a leader in synthetic biology focused on collaborating with companies in Health, Food, Energy, Environment, and Consumer sectors to create biologically-based products that improve the quality of life and the health of the planet. Through the Company's proprietary UltraVectorÂ® platform and integrated technology suite, Intrexon provides its partners with industrial-scale design and development of complex biological systems delivering unprecedented control, quality, function, and performance of living cells."
Shares of XON have been very reactive to positive headlines lately. In mid January the stock soared on news it had signed an exclusive licensing agreement with the University of Texas MD Anderson Cancer Center in partnership with ZIOPHARM Oncology (ZIOP). All three will be working on a collaboration to "genetically engineer our patients' immune-system T cells to efficiently attack and destroy cancer cells."
Shares of XON rallied again on February 10th after Synthetic Biologics (SYN), in collaboration with XON, announced positive Phase 1b trial results for a treatment to prevent C. difficile infections. In the press release SYN states their "oral beta-lactamase enzyme designed to protect the microbiome and prevent Clostridium difficile (C. difficile) infection, antibiotic-associated diarrhea and secondary antibiotic-resistant infections in patients receiving intravenous (IV) beta-lactam antibiotic therapy... U.S. Centers for Disease Control and Prevention (CDC) has identified C. difficile as an 'urgent public health threat' that often occurs in people who have had recent medical care with IV antibiotics. These antibiotics can create a harmful imbalance in the gut microbiome by killing "good" bacteria, giving C. difficile a chance to multiply and cause diarrhea, which can lead to dehydration, fever, abdominal pain, cramping, nausea, colitis, and even death. In all, 24 million Americans receive IV antibiotics annually."
Then just a few days later on February 13th XON announced it was buying ActoGeniX for about $60 million. "ActoGeniX is a European clinical stage biopharmaceutical company forging a new frontier in cellular therapeutics and other innovative products. Its proprietary TopActâ„¢ platform enables the molecular engineering of food-grade microbes (Lactococcus lactis) to generate biologically-contained ActoBioticsâ„¢ for in situ expression and secretion of proteins, peptides and metabolites in the gastrointestinal tract of humans and other animals. This groundbreaking class of orally available biopharmaceuticals has the potential to facilitate targeted therapies against oral, gastrointestinal, metabolic, allergic and autoimmune diseases."
The stock rally continued after XON reported Q4 earnings on March 2nd. Analysts were expecting a loss of 15 cents a share on revenues of $26.1 million. XON reported earnings of $0.18, that's 33 cents better than expected. The company's revenues soared +335% from a year ago to $31.09 million.
Naturally XON's management was pretty optimistic. The company's CEO commented on the future saying, "Looking ahead, we are very excited about our near term prospects and have much higher goals for 2015. In Health, we expect to see new major alliances formed, while we believe that our existing ECC partners will be in the clinic with up to ten novel therapeutic candidates. In Food, we anticipate continued growth of our base business with projected product and service revenues exceeding $100M, while we sign new ECCs and execute on some attractive acquisitions. We expect that our program in Energy, which is based on our continuing work on the engineering of the methanotroph to provide for the upgrading of natural gas to higher value hydrocarbons, will show tangible progress both technically and otherwise. Finally, our relatively newer efforts in the Environment and Consumer Sectors should become contributors to our enterprise. At this stage in our growth, we fully appreciate the amplified effect of each additional level of achievement as well as the increasing synergies that exist among our platforms, teams and even among our partners. This realization inspires us to ever greater levels of performance on behalf of our shareholders."
Curious investors can see a lot more about XON's collaborations and acquisitions on the company website. Here's a link to their
The big rallies in XON have been fueled by short covering. The most recent data listed short interest at 35% of the relatively small 42.4 million share float. Today shares of XON are hovering near round-number resistance at the $50.00 level. Further gains from here could spark even more short covering.
Before I continue I want to remind readers that we consider biotech stocks aggressive, higher-risk trades. The wrong headline can send this stock crashing. We often see biotech stocks gap open (up and down) so stop losses don't always work the way there are supposed to.
We will still try and limit our risk with a stop loss at $46.90. You could use options to limit your risk but after such big gains in XON over the last several weeks the option prices are very, very expensive.
Tonight we're suggesting a trigger to launch small bullish positions at $50.65.
Trigger @ $50.65 *small positions to limit risk*
- Suggested Positions -
Buy XON stock @ (trigger)
- (or for more adventurous traders, try this option) -
Buy the Apr $55 CALL (XON150417C55) current ask $3.80
Option Format: symbol-year-month-day-call-strike