RE: WHY are we at this level??Could someone tell me (logically) WHY we are trading at this level?
It could be one or more of the following reasons:
1) Canadian firms don't know how to promote their product as well as American firms can. How many Canadian tech firms did well without first being accepted in the American marketplace? Do you think RIM would be as big as it is today without acceptance by Americans?
2) There is a stigma attached to Canadian tech companies. Canadians don't believe a Canadian company can deliver a leading edge product so Canadian investors aren't sure how effective Proficia is and are waiting for Phase II results before investing.
3) Canadian investors prefer American biotech firms because they are better funded and heavily traded. (Perceived to be less risky). If 250,000 people invest in a biotech company, then it is considered safer than a company that has only 15,000 investors. People like to follow a crowd. If 250,000 people have invested in a company then they think they all did their due diligence and the company has less risk.
4) Canadian investors will only invest in Canadian (bio-)tech firms if Americans invest in it first. If the company gets America's stamp of approval by having Americans invest heavily in it, then it must be a good company and Canadians will start investing too.
5) The H1N1 virus scare has subsided and vaccines are no longer the top story on the evening news so it is not on the minds of investors.
6) Many potential investors think Medicago can only develop a vaccine for H5N1. This bird flu virus does not affect them directly so they don't see the profit in developing an H5N1 vaccine. They don't realize Medicago's Proficia process has the potential to develop vaccines for other viruses like: common flu virus, malaria, HIV, rabies, chicken pox, measles, mumps, herpes, yellow fever, ebola, hantavirus, dengue fever and the list goes on and on. Once Medicago turns out vaccines for other viruses (cheaper and faster), Americans will take notice and will be pounding on the door to get a piece of the action.
If Medicago was an American firm, the price would be at least 20x higher than it is now. If the Phase II trials are successful and Medicago gets promoted in the States, the price will move higher. Once the money starts coming in, they may get listed on Nasdaq and then it can eventually become a billion dollar company (if they are not bought out first). All of this takes time and won't happen overnight. It took RIM 9 years to get from a $1.14 stock to a $130 stock.
What you have to decide is this:
1) what is Medicago's downside (how far will the price drop) and
2) what is Medicago's upside potential if they are successful?
Yes, 2010 has been a disappointment for Medicago, but where will the stock price be 3 to 5 years from now? If you think it will be lower, then sell. If you think the stock will be 5x higher in 3-5 years, then what other stock can offer that potential? We won't know for sure until the Phase II trials are completed. If they are successful, then it could be like buying RIM when it was only $5.
Wiz