Health care stocks can skyrocket in the blink of an eye. Sometimes this blistering movement upward is followed by a meteoric crash, and other times the momentum is carried forward to produce stellar gains. What matters most is the nature of the underlying catalyst.
With that in mind, here is a Fool's take on three health care stocks that soared on heavy volume yesterday.
Cytori Therapeutics (NASDAQ:CYTX) burnt rubber yesterday climbing over 60% on unusually high volume due to the company signing a licensing deal with Lorem Vascular. The newly minted partnership aims to commercialize Cytori Cell Therapy for the cardiovascular, renal, and diabetes markets in China, Hong Kong, Malaysia, Singapore, and Australia. Per the terms of the agreement, Cytori could receive up to $531 million in milestone payments over a 30-year period, and Lorem is set to invest $24 million in Cytori stock at $3 per share for a product supply agreement.
Even after this mind-boggling move up, Cytori still only has a market cap of $225 million and remains a very volatile and speculative stock. While Foolish investors look at financial markets over the long term, stocks that soar like this often dip soon after when investors take some of their profits off the table. Cytori, for instance, is down almost 14% this morning after yesterday's huge jump. Nevertheless, landing a major commercial partner makes me more interested in looking at Cytori's long-term prospects.
Omeros (NASDAQ:OMER) moved up double digits yesterday after announcing positive early stage clinical trial results for its age-related macular degeneration therapy. Based on these results, Omeros plans on enrolling patients for a mid-stage trial in early 2014. Investors are excited about this development because the age-related macular degeneration market is worth billions. So if Omeros' clinical candidate can capture even a fraction of this large market, it would be a big boost for a company with a market cap south of $300 million.
Yet, there are plenty of reasons investors should be cautious with this rising mid-cap biotech. Omeros shares have already appreciated more than 150% in the past six months, and the company is going to rely heavily on money from public markets to fund its clinical program in the near future. With mid-stage trial results a good ways away, Foolish investors might want to stay on the sidelines until shares pullback a bit.
MannKind (NASDAQ:56400P706) rebounded nicely yesterday on heavy volume after its quarterly earnings release showed a much improved cash position of $93.8 million. That's roughly triple what MannKind had in the till last quarter. Unfortunately, this dramatic increase in cash reserves comes mainly from warrants being exercised, which has severely hampered share price appreciation recently. With a greatly improved cash position, however, MannKind can now focus squarely on the pivotal task of getting its inhaled insulin product Afrezza approved by the FDA next year. Based on the company's current burn rate of roughly $12 million a month, MannKind should have enough cash to wait out the FDA's decision without having to continually dilute shareholders.
Even so, MannKind has yet to provide any clues as to a potential marketing partner or licensing deal for Afrezza. So it's difficult to estimate how much value Afrezza truly creates for MannKind shareholders. The one certainty, however, is that any type of regulatory setback will be a major blow to MannKind at this point. With all the unknowns surrounding Afrezza right now, it might be best to wait until the story unfolds a bit more before investing.
George Budwell has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.