Markets are starting to perk up in 2023 after a long and difficult bear market year in 2022. Investors eager to put capital back to work have been waiting for the right time – when the world doesn’t look so scary.
However, history suggests the real market turn back to a bull market bias will come well before the bad news is over.
There are several markers that suggest the rally we have seen over the past week is different from the head fakes market participants have endured over the past year. One major one is retail trader positioning.
New data from the Options Clearinghouse shows that buy-to-open options contracts are more heavily skewed toward puts than at any time since December 2008, and early 2003 before that. Both of those moments were the end of major bear markets.
At the same time, the latest Fund Manager Survey from Bank of America shows the largest one-month drop in cash holdings among large fund managers in years. Follow the smart money – Wall Street is already starting to put the dry powder to work while the non-professional money is finally loaded up on bearish bets.
All of this is a long-winded way to say, it may be time to start finding next-cycle opportunities with the potential to be ten baggers.
We would point to speculative biotechnology as one core zone of focus, and, in particular, early stage players that appear set to transition from phase one to phase two clinical research.
In other words, finding promising cheap biotech plays that are on the precipice of completing phase one research can be a powerful speculative strategy, especially when confronting a market defined by a ton of dry powder underneath the surface.
One candidate that checks all of these boxes is Nascent Biotech Inc. (OTCMKTS:NBIO).
NBIO: Drilling Down
NBIO checks all the boxes discussed above. It’s a dirt-cheap stock, trading on a market cap of just $16 million. And the company most recently announced the completion and closure of enrollment for the final cohort of patients involved in its Phase I trial to evaluate Pritumumab (“PTB”) as a treatment for Brain Cancer.
According to the company’s release, following the completion of patient dosing in this fifth and final cohort, the company’s Phase I trial will be complete. The company will then prepare and submit research data to the FDA in preparation for the launch of its Phase 2 clinical research.
“Closing enrollment for this final cohort of our Phase I trial is a tremendous milestone that marks the start of our preparation for Phase II research,” noted Nascent CEO, Sean Carrick. “This is a significant accomplishment in the advancement of our Biologic asset and in our mission to help future patients in their battle against this terrible disease.”
PTB is a natural human antibody that binds to Cell surface Vimentin (also referred to as ectodomain vimentin), a protein expressed on the surface of epithelial cancers. PTB is used as a targeted immunotherapy that seeks out only cancer cells while sparing healthy cells.
Strategy in Play
One of the reasons we like this strategy – finding cheap biotech names with new platforms nearing a potential announcement of the upcoming start of Phase 2 research – is because this is how big Pharma hunts for acquisitions.
According to research from Statnews.com, experts are predicting a coming surge of mergers and acquisitions in biotech, which bodes particularly well for early-stage players in the space.
The piece notes that the last surge in biotech acquisitions occurred from 2013-2018. During that period, nearly 25% of the acquisition targets hadn’t ever begun even a phase 2 trial. That period represented an evolutionary shift toward targeting earlier stage players relative to previous consolidation periods in the space.
All information released by NBIO over the past year suggests that the company has encountered no major hiccups during phase one, which is typically just about confirming safety and some level of efficacy ahead of more intensive phase two research.
In other words, NBIO is a perfect example of the type of early stage biotech that gets disproportionately snapped up in these acquisition binges. And that could give the stock some extra juice as speculative money takes a fresh look at the market in 2023.
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