Thursday’s stock action saw shares of OvaScience, Inc. (NASDAQ:OVAS) soar nearly 23.2%, or $8.13, following corporate news that the company fully accomplished its 2014 clinical goals.
Shares of the Cambridge-based company closed the day at $43.09 with more than 1.9 million shares trading hands. This compares to the company’s three-month average volume of nearly 200,000 shares.
The chart below illustrates how the company engaged in the discovery, development, and commercialization of new treatments for infertility has nearly gone parabolic with shares rising more than 371.4% year to date.
Disruptive Technology…
Indeed, the company is greatly benefitting from its disruptive technology, called AUGMENT, which is designed to improve a woman’s egg health by using mitochondria from the patient’s own egg precursor (EggPCSM) cells during in-vitro fertilization (IVF).
From the patient’s point of view, the technology is far superior to current IVF treatments since the patented technology doesn’t require expensive intracytoplasmic sperm injections (ISCI) or grueling hormone booster shots.
And in the company’s press release, the firm reported that it has exceeded its AUGMENT patient goal with more than 150 patients now receiving the fertility treatments.
In 2015, the company expects another 1,000 additional patients to be receiving the AUGMENT treatment at its clinics in North America (Canada), the European Union (the United Kingdom), Turkey, and the Middle East (the United Arab Emirates).
While the treatments are not yet available in the United States, the company reported that the company has a signed commitment from one of the largest IVF clinic networks in Japan, which plans to offer the AUGMENT treatment in 2015.
Entry into the lucrative Japanese market should provide the resources for the company to shore up its financials.
Weak Financials Weighing Down the Stock
Net losses for Q3 2014 were $12.9 million, nearly double the net loss of $6.9 million reported in the same quarter last year. On a per-share basis, the loss was $0.54 compared to a $0.40 loss in Q3 2013.
According the company’s filings, the increase in net loss was attributed to higher personnel costs, as well, as additional research and development expenses related to the launch of the AUGMENT treatment, which increased to $5.3 million. This compares to R&D costs of $3.2 million for the same period in 2013.
But it’s the downward earnings estimates that concern shareholders the most.
Over the past two months, there have been four earnings estimate revisions, falling from -$1.71 per share two months ago to -$1.95 per share today.
And the disconnect between the stock’s price and its earnings revisions portend trouble for the stock on the horizon.
Now, don’t get me wrong. Long term, this stock will continue to rise as the technology proves successful in the treatment of infertility.
But for now, OvaScience’s weak financials and still rather limited market means the stock has gotten ahead of itself and will likely pull back before continuing its climb higher.
This means that investors should avoid buying this disruptive technology stock until share prices come back to ground.
Until then, the only thing this stock will conceive is volatility.
Good investing,
BY Richard Robinson