Biomira Inc.

09/30/04 08:54:00 AM

by Koos van der Merwe

Biomira Inc. is a biotechnology company specializing in immunotherapy and organic chemistry for the development of cancer therapeutics. The company's commitment to the development of products for the treatment of cancer is currently focused on synthetic therapeutic vaccines and innovative strategies for immunotherapy of cancer.

Security: BIOM, BRA-T
Position: N/A

A news report came out on September 29, 2004, concerning Biomira and Merck KGaA that the US Food & Drug Administration (FDA) has granted fast track status to the investigation of BLP25 Liposome vaccine (L-BLP25) for its proposed use in the treatment of non-small cell lung cancer (NSCLC).

The share price gapped up immediately upon the release of the report, moving from $1.12 to a high of $1.72. Nice. But how would you have known that the announcement was forthcoming and that the Canadian company had achieved a major breakthrough in lung cancer therapy? All previous news reports were on research into breast and ovarian cancers. A chart offers no clue, although the daily chart shown does illustrate the occasional rise of hope as the company's share price fell from a high of $2.45 in March 2004 to a low of $0.77 by July 23. The company believed in its research, as did Merck KGaA, but investors became demoralized and offloaded the share.

Figure 1: Biomira. A Canadian biotechnology company listed in Toronto and Nasdaq. The chart is of the Nasdaq price.

Graphic provided by: AdvancedGET.

Then the price rose from $0.77 to $1.35 on July 30. All news during this period had to do with breast and ovarian cancers. The share price rose on anticipation of a major breakthrough, but then fell as nothing happened. It then formed a cup formation as shown on the chart -- a period of accumulation -- and gradually rose to retest the $1.35 level as the handle to that cup. This pattern now suggested that a break above $1.35 would see a rise to a target of $1.78 (1.35 - 0.92 = 0.423 + 1.35 = 1.78), should the $1.35 level be penetrated. It was, but on a gap to a high of $1.75 on volume that was very much above average. Could you have foreseen this? Only if you had had faith in the company, and their research.

What about the future? Well, the stochastic indicator still looks bearish, and prices tend to fall to fill a gap, so we could see a fall to the $1.51 or $1.21 level. The support at the pivot point of $1.33 seems likeliest.

We cannot forget that the FDA fast track program is designed to speed the review of drugs intended to treat serious or life-threatening conditions, and is usually a drug that shows signs of promise. Any fall in the price would therefore present a very good opportunity to take part in what looks like extremely promising research.

Koos van der Merwe

Has been a technical analyst since 1969, and has worked as a futures and options trader with First Financial Futures in Johannesburg, South Africa.