If you're the CEO of a large corporation, you do not want to see
your company's name in this article. The companies in this article
stumbled -- badly -- in the past year and have seen their
prices fall by half -- or more. Apparently, nobody told these
companies that there was a
But every dog has his day. Just look at shoe maker
. Its shares plunged from $69 in October 2007 to just $1 in early
2009 as demand for the eponymous trendy shoes dried up. Those shoes
came back into vogue last year, bringing shares back up to around
$17. That's still a big loss for early investors, but for those who
gave shares a fresh look when all hope was lost, powerful gains
were to be had.
And all hope appears lost for the companies I'm looking at today.
Some of these stocks may head even lower.
Dex One (Nasdaq:
, for example, may have to reorganize itself under bankruptcy
protections, as it is choking on too much debt. That move could
render shares worthless.
Barnes & Noble (NYSE:
could bounce back nicely. Yet, a move back to where it stood a year
ago, at roughly $23 and 155% above current levels, may be too much
to ask. In a similar vein, I recently said I think Eastern European
Central European Distribution (Nasdaq:
, though I expect it to re-trace only half the losses incurred in
the last 12 months.
I've looked closely at all the names on this group and found one
that has the making of "The Comeback Stock of the Year." It's
Allos Therapeutics (Nasdaq:
, which has been frustratingly slow to ramp up sales for a key
cancer drug. With each passing quarter, shares have drifted ever
lower, even as the company's long-term outlook remains bright.
Allos has also developed FOLOTYN, which is used in treating
relapsed and refractory T-cell lymphoma (R/R PTCL), and is also
being tested to see if it will be effective against non-small cell
lung cancers (NSCLC), breast cancer and bladder cancer. It's been
hard to build revenue in the R/R PTCL application, leading the
company to deliver stubbornly high quarterly losses. Sales shot up
from $3.6 million in 2009 to $35 million in 2010, but analysts had
even higher hopes for annual results when 2010 began. They still
think sales will hit $100 million by next year, but Allos had been
thought capable of far-higher revenue by 2012.
So what went wrong? Part of the nature comes from "missionary
selling." FOLOTYN is not backed by a large pharmaceutical sales
force, nor is it supplanting similar drugs. Because it's a new
approach, the drug reps must go through a lengthy education process
with doctors to explain why FOLOTYN is better than existing drugs
that are less effective but work in better-understood mechanisms
for cancer cell treatment.
As the education process continues, some investors think Allos will
still deliver on its initial promise. Analysts at Brean Murray
think FOLOTYN will generate $250 million in annual sales within
half a decade for the PTCL treatment alone. "We believe
investors have been overly focused on the sales figures but have
lost sight of positive trends, including potential account
penetration, new patient adds, and potentially longer treatment
," wrote the analysts in September.
Recent quarterly results show FOLOTYN may finally be gaining some
momentum. Fourth-quarter sales of $11.8 million were up 27%
sequentially, although management dampened the good news by also
guiding analysts to forecast slightly higher operating expenses
than they previously had. Analysts at Needham are perhaps the most
bullish on the Street. They see sales rising to $65 million and
$127 million in 2012, both of which are above the consensus
As noted earlier, Allos is testing FOLOTYN in a range of other
cancer treatments and early clinical trials have been promising.
It's a good thing the company has $98 million remaining in cash, so
a development partner is not yet required.
Action to Take -->
Analysts at Needham and Brean Murray think shares could more than
double from here, with $8 and $9 price targets, respectively.
Sanford Bernstein suggests Allos may get acquired before ever
bringing all of the applications for FOLOTYN to fruition. With
nearly $100 million in cash, shares have likely found a floor in
the current $3 range after plunging from $8 last spring. A
167%-plus move back to that level would certainly make this a
contender for the "Comeback Stock of the Year."
-- David Sterman
P.S. -- I don't know if you're aware of this or not, but a
20-year energy agreement between the United States and Russia is
about to expire. The problem is, this deal supplies 10% of
America's electricity. When the Russians refuse to renew the
agreement, the U.S. will face an entirely new kind of energy
crisis. This disruption could send a handful of energy stocks
through the roof. Keep reading…
Disclosure: Neither David Sterman nor StreetAuthority, LLC hold
positions in any securities mentioned in this article.
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