(By Rich Bieglmeier) Yesterday, iStock wrote about how we monitor money flowing into and out of stocks. In stock market lingo, it is called accumulation or distribution. Old school and new school investors should monitor money in motion to help pinpoint stocks of interests.
Our second high participation stock relative to its market cap is Rosetta Genomics, Ltd.
). The company is a leading developer of microRNA-based diagnostic tests and therapeutic tools.
The tiny bits of RNA play a part in gene regulation, which involves how and when genes turn on and off.
According to Whitehead Institute for Biomedical Research, "A main problem for making a good drug is that you need to have a good drug target. Only a subset of genes or gene products can function as a good drug target that is amenable to manipulation by pharmaceuticals.
The major potential advantage of RNAi as a therapeutic is that if you want to inactivate or inhibit any gene product, no matter what kind of protein structure it makes, you can target and inhibit it with RNA interference. In that way it may open up a tremendous class of drug targets that was totally inaccessible before."
In other words, RNA offers the potential to green light or red light messaging between DNA and proteins, which could have big implication for the treatment of diabetes brain disorders, and cancer.
Last week, 3.33% of the company's market cap flew into this lightly traded stock. Rosetta Genomics trades an average of 785,655 per day and has approximately 16,908,087 shares outstanding. With limited shares available, any wave of buying or selling will cause this stock to move in a big way.
The company recently did a reverse split to meet the requirements of the NASDAQ to maintain its listing, and raised $6.6 million by offering 570,755 ordinary shares at a price of $11.50 per share in a direct offering to investors. Since then, the share price has fallen to roughly $10 per share.
While ROSG has some potential winners in its pipeline for cancer and women's health issues, it is iStock's view that investors should hold off before adding this stock to their portfolio.
There is very limited financial information available on the company, which is a bad omen. From what we could uncover, the company earns at most a few hundred thousand dollars per year from ongoing operations, while losing millions – not a combo that iStock favors.
ROSG must constantly raise money through partnerships or additional offerings; otherwise, its burn rate will make its stock certificates frame worthy only.
Based on our technical analysis and experience with reverse splits, ROSG shares are likely to continue on their downward trajectory. Shares have some initial, light support in the high $9s; however, it wouldn't take much selling to crack a hole in the floor. iStock sees more sturdy backing closer to $6, and a ton of technical debris all the way down to $4.
Minus a major financing partnership with a biotech or pharmaceutical major, the $4-$6 range is the earliest we might consider adding Rosetta Genomics, Ltd. (ROSG).