We recently started a series called “Penny Stock of the Day”. These ideas are geared for traders with an extremely high risk appetite.
Our Penny Stock of the Day is chosen by screening for stocks under $5 and then applying technical analysis on the shortlisted set of penny stocks showing unusual volume. When making these trades, please make sure to pay vigilant attention to pricing moves and have a strict stop loss in place to avoid significant losses.
Penny Stock of the Day: Lipocine Inc. (NASDAQ: LPCN).
Today’s penny stock pick is the clinical-stage biopharmaceutical company, Lipocine Inc. (NASDAQ: LPCN).
Lipocine Inc. focuses on the development of pharmaceutical products for the treatment of metabolic and endocrine disorders
The company has a portfolio of product candidates designed to produce pharmacokinetic characteristics and facilitate lower dosing requirements, bypass first-pass metabolism in certain cases, reduce side effects, and eliminate gastrointestinal interactions that limit bioavailability.
Its lead product candidate is TLANDO, an oral testosterone replacement therapy. The company’s pipeline candidates also include LPCN 1144, an oral prodrug of bioidentical testosterone that is in Phase II Clinical trial for the treatment of non-cirrhotic non-alcoholic steatohepatitis (NASH); TLANDO XR, an oral prodrug of testosterone for once daily dosing, which has completed Phase II clinical trial in hypogonadal men; LPCN 1148, an oral prodrug of bioidentical testosterone that has completed phase I clinical trial for the treatment of NASH cirrhosis; and LPCN 1107, an oral hydroxyprogesterone caproate product that has completed dose finding Phase II clinical trial for the prevention of recurrent preterm birth.
Website: www.lipocine.com
Latest 10-k report: https://sec.report/Document/0001104659-21-034761/
Analyst Consensus: Based on 3 Wall Street analysts offering 12-month price targets for Lipocine in the last 3 months, the stock has an average price target of $2.67 and an average rating of ‘Strong Buy’. Cantor Fitzgerald analyst had given a price target of $3.00 for LPCN, which is a 106.90% upside from the last close.
Potential Catalysts / Reasons for the Hype:
- Upcoming 36-week biopsy data, expected August 2021, for the ongoing Phase II LiFT (Liver Fat intervention with oral Testosterone) study. The study is investigating LPCN 1144 in biopsy-confirmed Nonalcoholic Steatohepatitis (NASH) male subjects.
- FDA clearing LPCN 1154 IND application for a Phase 2 Postpartum Depression Study.
- Anticipation for full FDA approval for Tlando.
- A good pipeline of drugs, including LPCN 1111, a next generation oral testosterone therapy product, and LPCN 1107, indicated for the prevention of preterm birth.
- Rumors about a future potential partner to market tlando or other drugs.
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Symmetrical Triangle Pattern Breakout: The daily chart shows that the stock has currently broken out of a Symmetrical Triangle pattern with high volume. A symmetrical triangle is a continuation pattern and is characterized by two converging trendlines connecting a series of sequential peaks and troughs. This is marked on the daily chart as blue color lines. Once a stock breaks out from a symmetrical triangle pattern, it usually moves higher.
LPCN – Daily Chart
#2 Bullish ADX and DI: The ADX indicator shows bullishness as the +DI line is above the -DI line, and the ADX line has started to move higher from below the +DI and -DI lines.
#3 Price above MAs: The stock is currently above both 50-day as well as 200-day SMA, indicating that the bulls have currently gained control.
#4 MACD above Signal Line: In the daily chart, the MACD (light blue color) is currently above the MACD signal line (orange color). This indicates a possible bullish setup.
#5 Downtrend Channel Breakout: The daily chart shows that the stock has broken out of a downtrend channel, which is shown as pink color lines. This is a possible bullish indication.
#6 Double Bottom Pattern: The weekly chart shows that the stock is currently forming a double bottom pattern, which is shown in pink color. A double bottom pattern is a strong bullish pattern and a breakout from it would indicate that the stock could surge higher.
LPCN – Weekly Chart
#7 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, indicating possible bullishness.
#8 Bullish MACD: The weekly chart also shows that the MACD line (blue color) is currently above the MACD signal line (orange color). This is a possible bullish setup.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for LPCN is above the price of $1.50.
Target Prices: Our first target is $2.30. If it closes above that level, the second target price is $3.50.
Stop Loss: To limit risk, place a stop loss at $0.98. Note that the stop loss is on a closing basis.
Our target potential upside is 53% to 133%.
For a risk of $0.52, our first target reward is $0.80, and the second target reward is $2.00. This is a nearly 1:2 and 1:4 risk-reward trade.
In other words, this trade offers 2x to 4x more potential upside than downside.
Potential Risks / Red Flags:
- As per the latest quarterly report, the company had a net loss of $10.2 million for the six months ended June 30, 2021, compared to $12.1 million for the six months ended June 30, 2020.
LPCN – Quarterly Results
- Lipocine had ongoing litigation, Lipocine Inc. v Clarus Therapeutics, Inc., No 19-cv-622 (WCB) in the U.S. District Court for the District of Delaware. The company has now entered into a global settlement and license agreement with Clarus Therapeutics Inc. As per rumors, LPCN has agreed to pay Clarus $4.0 million – $2.5 million immediately, $1.0 million on July 13, 2022, and $500,000 on July 13, 2023.
- LPCN has incurred losses in most years since its inception. As of December 31, 2020, the company had an accumulated deficit of $172.0 million. The company’s net loss was $21.0 million for the year ended December 31, 2020, compared to $13.0 million for the year ended December 31, 2019.
LPCN – Annual Report – Consolidated Statements of Operations and Comprehensive Loss
- On December 27, 2019, the company had received a notice from the Listing Qualifications Department of The NASDAQ Stock Market stating that for the last thirty consecutive business days the bid price for the company’s common stock had closed below the minimum $1.00 per share requirement for continued listing on The NASDAQ Capital Market under NASDAQ Listing Rule 5550(a)(2).
- Despite being a loss-making company, the company executives are drawing good compensation.
LPCN – Executive Compensation
- The company would need significant funds to meet operational needs and capital requirements for product development, regulatory compliance, and clinical trial activities. The company’s capital resources may be consumed more rapidly in case of additional clinical studies for LPCN 1144, TLANDO XR, LPCN 1148, and LPCN 1107. This may result in the company raising additional capital through public or private equity offerings. If that happens, the ownership interest of existing stockholders will be diluted.
- LPCN depends primarily on the success of its lead product candidate, TLANDO. In case the drug does not receive regulatory approval or be successfully commercialized, the stock could slide lower. In case T-replacement therapies are found or are perceived, to create health risks, the company’s plan to sell TLANDO and TLANDO XR (LPCN 1111) could be materially adversely affected and LPCN’s business could be harmed. Oral testosterone has been rumored to increase the chance for liver toxicity and the bioavailability is much lower. This could also adversely impact the company prices.
- The company faces substantial competition in the TRT market. Other competitors may discover, develop, or commercialize products before or more successfully than LPCN.
As you can see, today’s featured penny stock offers big upside potential… but it also comes with a number of risks and red flags. As always, when dealing with penny stocks, we advise caution before entering into such high-risk ventures. Remember to think before you trade… understand the risks… and if you decide to trade, stick to your stop-losses!
Happy Trading!
— Trades of the Day Research Team
READ BEFORE TRADING PENNY STOCKS: The allure of penny stocks lies in their potential to deliver massive gains in a short period of time. However, in exchange for that opportunity, most penny stocks carry tremendous risk. They can be extremely volatile and are susceptible to “pump and dump” schemes and fraud.
Unlike regular stocks, the financial condition of most penny stock companies can be extremely difficult to analyze, as the majority of such stocks are traded on over-the-counter (OTC) exchanges, which are typically less transparent and less regulated than the major exchanges. In fact, in the penny stock space, it’s often easier to spot warning signs and red flags than it is to identify a sound investment. Nevertheless, we do our best to identify short-term trade opportunities in this exciting space because we know some of our readers are looking for high-risk, high-reward ideas. We just urge you to make sure you fully understand the risks before making any of these trades.
This is the #1 Stock to Buy for the AI Tidal Wave [sponsor]Marc Chaikin warned people about NVDA before its 2023 bull run - now he's naming his next pick or the AI tidal wave. Learn more here.