Avenue Therapeutics (NASDAQ: ATXI) stock has not been having a good time of it these past 12 months, the price is down 92% by some calculations. Avenue is a research and or clinical (the terminology can vary here) pharmaceutical company working on intravenous (or IV) tramadol. This is an area of great interest but also with certain problems.
Tramadol is a good pain reliever, no doubt about that for it’s an opioid. We’ve been using opium itself for millennia, derivatives like morphine, heroin and so on for at least a century for that pain relief. Opioids are good at doing this. But opioids also come with certain risks.
The first is the potential for addiction. That whole Sackler family and OxyContin thing is about exactly that, folk taking the pills and then becoming addicted. We’ve all heard of the potential for heroin addiction as well.
So, while the opioids have those wonderful therapeutic qualities in pain relief there’s also that worry over addiction and thus a certain problem in gaining licences for new formulations.
There’s also a second problem, which is that of overdose. This is where fentanyl (a synthetic opioid) is so dangerous. Opioids not only relieve pain, they can also cause suppression of breathing – this is the usual route to death through an overdose. So, again, there’s considerable attention paid in the licencing process to whether this particular form of, or dosing method of, an opioid is going to run into this problem as well.
This is where Avenue seems to have been having problems with the FDA over IV Tramadol. We know it’s a good pain reliever, it can be and is offered in pill form. But the IV form seems to have a certain delay in action. That means that overdose is more possible than desired perhaps – that wait for relief might lead to a higher, or another, dose being taken.
That’s the latest news we’ve had on Avenue Therapeutics at least. The FDA = or the usual committee which then informs the FDA decision – turned down the IV Tramadol on these technical grounds.
So, why the 120% stock price jump today? That’s the mystery of course. It is possible for a company to appeal, or at least ask for a reconsideration, of such decisions. Very occasionally they are reversed as well. So it could be that. Or, it’s possible that we’re watching one of those problems with microcap companies. The total valuation at Avenue is only $5 million – at yesterday’s price. So, it wouldn’t take much buying to produce a stock price jump. Such things can be self-sustaining of course, just look at what /rwallstreetbets did to GameStop and Cineworld.
But then the existence of such self-sustaining stock price jumps will also lead to some possibly trying the much older technique of pump and dump.
The problem for us in trying to trade Avenue Therapeutics today is that there is no new news as yet to justify the 120% price jump. So, is such news about to come out and it has leaked? Or is there manipulation here? In the absence of actual news either way it’s an unknown. That makes trading in Avenue Therapeutics entirely a bet until more and better information is available.
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Tim Worstall is a freelance writer specialising in economics and the financial markets.