Seneca Biopharma (NASDAQ: SNCA) came out of the markets storming 100% higher today at $1.67. The volcanic surge is off the back on no news, leaving investors confused. SNCA forums on Yahoo Finance and Stockwits are flooded with the same question “why is SNCA up”?
Why is Seneca surging?
The unsureness of why SNCA is up did not stop investors from rallying behind the biotech even more. Investors must understand that the stock market is based on one thing: expectations. Thus, some investors, maybe insiders, clearly expect a positive announcement otherwise, they would not have pumped so much money in.
In the biotech world, the news catalysts include positive trial results, FDA approvals, funding, or manufacturing agreements to market the drug. Seneca’s Amyotrophic Lateral Sclerosis (ALS) drug (NSI-566) passed through phase 1 and 2 hurdles with flying colours. The positive discussion between the FDA and SNCA in April led the biotech to believe that initiation of a phase 3 trial was likely. FDA approval for SNCA to enter phase 3 would trigger a buying frenzy.
However, since the FDA meeting, SNCA has been quieter than a church mouse. Meaning the sudden eruption could be insider’s knowing that a potential phase 3 press release is imminent. Many SNCA investors are speculating a phase 3 announcement after today’s rise.
Furthermore, the buying between 10:30 am – 12 pm reflected retail investors buying because of ‘FOMO’, riding the morning momentum, or speculating a possible FDA approval.
Is it too late to invest?
Before I start, I am obliged to remind our viewers that this is not advice only general commentary from my extensive research in this area.
First of all, Seneca is in a financial nightmare. Earnings are -12.18 million, free cash flow is -7.62 million, and revenue is only + 18,000.
At a snapshot, these financials represent a biotech that is nowhere near market success.
On the other hand, Seneca is making promising headway in the drug development department. With successful phase 1, and 2 clinical trials under their belt, commencement of a phase 3 trial would be excellent. Because a) the FDA must approve the trial and b) a successful phase three would allow SNCA to market the drug . Ultimately, allowing SNCA to turn around the current financial nightmare.
Thus, ill say it is too risky too invest for the day trade profit . Especially because the stock is exploding on extreme speculation. (opinion not advice). However, playing it out for the medium term (1-2 months) could be a possible option if you undertake your own research first. I would use today’s volatility to cement my position (opinion not advice).
If you aren’t already subscribed to us, you can subscribe for free via email below and get updates when we post new articles and stock market news. From all of us at YIG, thank you for the support.
The information above should not be taken as financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
Here is our free, uncomplicated, and extensive ASX portfolio
Want access to free, uncomplicated, and smart COVID-19 Strategies then click below?
Written by Patrick Mcloughlin, Senior Manager of YIG.