It has only been a couple of weeks since we last looked at OWC Pharmaceutical Research Corp (OTCMKTS:OWCP).
At that time, we published a piece titled “The Calm Before The Storm” and concluded with the suggestion that the seeming quiet period that company was going through during late August and early September was likely a considered approach to marketing communication based on the fact that every time OWC management did put out a press release, and it didn’t relate to the data that markets were waiting on, the company took a hit.
In turn, we suggested that, when the did finally hit press, and assuming it was positive, the stock could really run based on the fact that it had been beaten down so much without any real justification for the decline.
At the time of our coverage, OWC was trading for around $0.25 a share and we suggested that any near-term weakness was a nice opportunity to pick up some shares ahead of what we believed would be a strong recovery once it started.
Fast forward to Thursday this week and our thesis has played out to the letter. Well, with one exception. The company now goes for $0.35 a share having closed out for a 44% run during the Thursday session in the US. However, the data we were looking for hasn’t actually hit press.
So what’s causing the run?
Well, a few things.
First, a company called Zynerba Pharmaceuticals Inc (NASDAQ:ZYNE) just reported positive data for a cannabis-based treatment in a condition called fragile X syndrome and, at a time when market sentiment towards cannabis-based treatments was waning somewhat, this validation has not only boosted the just mentioned Zynerba, but has also served up some collateral benefit for other cannabis biotechs – one of which is OWC.
That doesn’t account for a nearly 50% revaluation, of course, and we think there’s more at play here.
We noted in our previous coverage that management suggested (in its latest letter to shareholders) that the target for some data hitting press related to the company’s lead psoriasis cream trial was third-quarter this year.
We are now at the end of the last week of the quarter meaning, if the company is to hit its own targets, we should see some data hit press today. There is a good chance, then, that either somebody has got word of the data before it is released and is loading up in anticipation of a move on publication (not necessarily legal, of course, but we would be naïve to think that it doesn’t happen) or that the move we are seeing is symptomatic of markets recognizing the above fact (that the data should hit press today) and loading up on OWC shares in anticipation of that happening.
So where do go from here?
Well, now it’s a question of whether we do see data hit press or not during the session today.
If we do get some numbers and they are positive, the run we have seen during the session on Thursday is going to be compounded by an influx of speculative volume and we will likely see a continuation, with mid July highs in around $0.50 a share an immediate upside target and, beyond that, the one-dollar mark presenting a nice longer-term target.
If we don’t get data, we may see a short-term correction, but there is a good chance that the company will be able to hold onto a decent portion of the gains registered yesterday, so any dip might be a buying opportunity in anticipation of a near-term early fourth-quarter data release.
Keep in mind that there is always the risk that the data does hit press but fails to impress and, in turn, brings with it a selloff. With that said, however, expectations are that we will see some degree of safety and efficacy from the numbers presented.
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Image courtesy of KamiPhuc via Flickr
Disclosure: We have no position in OWCP and have not been compensated for this article.