Meaningful DiscussionIt is time to have a meaningful discussion regarding the expectations for the movement in the share price for Oncolytics. I, for one, am getting tired of dealing with a bunch of bozos who think that over 300 people reading my posts can be deceived. Oncolytics is a thinly traded stock and the stock price can be easily moved with large transactions, either way. Oncolytics continues to be under valued and there is a lot of room for the stock price to jump up. The only questions are how high and how fast will the stock move?
I checked at 12:19 PM today to see how the stock was doing. I was in for a surprise. ONCY was down 40 cents at $6.30 on a volume of 187,792. ONC was in step, off 43 cents at $6.30 on a volume of 112,146. I checked the current day trading graph on RBC Direct to see the trading pattern. From approximately 10:30 to 11:15, the stock price was under attack on both exchanges by selling pressure. Between 60,000 – 70,000 shares were sold on the NASDAQ and another 60,000 on the TXM. Can anyone provide a reason why an investor(s) would dump 130,000 shares today besides to attack the stock price? There is no published new news to explain the sell off.
My expectation for today was a continuation of the rally from December. There are reasons for institutional investors to be jumping on the Oncolytics band wagon. The information is out there to strongly expect good things to happen over the next 6 months. Phase 1 of the pivotal trial SPA will occur with the fanfare to warrant a conference call. The Spring Conference Season will update us on the trials that we did not hear about last Fall because participants with terminal and untreatable cancers are living longer. These big news items will drive partnership agreements to a head. I agree with the RBC Capital Market analysts and expect a deal to be announced by mid 2011. The following table is courtesy of Oncosaurus’ post and demonstrates the source of the December rally. Three elephants entered the room and I doubt that their research justified this morning’s sell off.
Top Three Buyers of ONC in December
| Investment House | Shares Bought | Average Price | Shares Sold | Average Price | Net Accumulation |
| 52 NCP | 310,000 | $6.351 | 0 | n/a | 310,000 |
| 4 Versant | 319,400 | $6.601 | 81,000 | $6.367 | 237,600 |
| 16 Paradigm | 363,631 | $5.444 | 175,479 | $6.212 | 188,152 |
To get the discussion going, I will use the RBC Capital Markets analysts’ Foundation Report. They rate Oncolytics at Outperform. Their modeling produces a forecasted EPS in 2016 of $1.56. They assume PE multiple of 17 to produce a target share price of $26.52 in 2016. I have no problem as accepting this work as producing a reasonable starting point.
I do not agree with their discounting to produce a price of $7.15 to justify their One-Year Target of $7.00. They used a standard assumption of discounting 30% per year for 3 years 8 months. The 3years 8 months consists of 5 years to 2016 less 12 months for the one year target period, and an additional 4 months to reflect market anticipation. I find this logic mechanical without anticipating the market to use judgement. The total discount for risk and time value of money to get from $26.52 to $7.15 is 73%. It is too heavy to reflect where the market will be on June 30th The market today should be seconding guessing where the stock price will be on June 30th, not jockeying around the current price which has been depressed for years.
My simple take on how high is a range of 50%-80% of the $26.52, or $13.26 to $21.21. The 50% represents the probability that the pivotal trial will be a success as a coin toss. The 80% is Brad’s representation that the SPA is based on the minimum probability of Reolysin being successful of 80%. Either end point of the range leaves plenty room for investors to participate in the further capital gains after June 30th. New money investors (buyers) today need to decide how much they will pay to get in on the action. Anything below $13.26 is a steal.
How fast depends on the influence of this Board. People who are selling today, tomorrow, and tomorrow’s tomorrow below $13.26 are being deceived and wasting a golden opportunity to make money. The faster the pool of retail investors who are willing to sell at the current low levels dries up, the faster the stock price will rise. Institutional money is boarding the band wagon. Even without retail investors holding onto their shares, the stock price will jump on the pending news releases in January, February, and March. I predict the stock price to be in the $13.26 to $21.21 range by the end of March.