La Jolla Pharmaceutical, Co. (OTCBB:LJPC) Spikes After Investor Forum Presentation

When a stock with a market cap a still low $5.9 million, something unusual may be going on. The unusual factor is a big $3.5 million injection from private investors into La Jolla Pharmaceutical, Co. (OTCBB:LJPC). The stock added more than 24% on Thursday, gaining to $0.194 on dollar volumes above $568,000. Plus, LJPC was recently invited to present at an investors’ conference, which is always a boost for the stock.

LJPC certainly impressed Baker Brothers Life Sciences, the investors that allegedly bought $3.5 million worth of shares without an 8-K to announce this. Perhaps this would be the biggest consideration for such an underpriced pharma stock. Yet the financials of LJPC are worth a look:

• $1.8 million cash

• $1.9 million total assets

• $308,000 total current liabilities

• No revenues

• $3.7 million net loss for last quarter reported

The company has around 30 million shares issued and outstanding as of June this year, and in 2012 decreased shares in a 100 for 1 reverse split. But what is worrying is that the company has authorized 12 billion shares, which could with time cause dilution, especially given that LJPC has no revenues and may be financing its R&D activities with new stock issues.

Before LJPC appeared on the BIO Investor Forum in San Francisco, the company placed $10 million worth of shares at 7 cents, and went through a restructuring. The proceeds of the financing round would go into a Stage 2 trial on treatments for kidney disease. Also, a Stage 1 proof of concept trial will start for drug LJPC-501.

The promise of LJPC hinges around targeted molecular drugs that aim at dealing with life-threatening organ failure. But so far, the trials are in their earliest stages, and perhaps years away from revenues. Still, LJPC is a very likely candidate for a good run and increased activity, due to the events in the last few days.

Biozone Pharmaceuticals, Inc. (OTCBB:BZNE) was another pharmaceutical company that attracted the attention of a large investor, suddenly increasing selling volumes. BZNE remains an uncertainty, perhaps being able to enter a new stage of trading as investors’ interest is honed by the latest events.

Soligenix, Inc. (OTCBB:SNGX) rose on positive news of earning contracts for R&D activities, but its climb has been supported by a larger number of investors. Still, in the past few days SNGX backtracked a bit, and seems weighed down toward the $2 levels.

If you want to choose any of the newcomers in the very active biopharmaceutical sector, keep in mind that tickers from that group are prone to sharp corrections, or slower loss of value when investors lose patience with the speed of innovation or marketing. In the case of LJPC, do your own research to determine how long you can wait out for some clarity and development, and how much you can afford to lose in negative outcomes.