Novogen: A Big Biotech Mover


Novogen Limited (ADR)


In the last three months Novogen Limited (NASDAQ: NVGN) has experienced over 15 trading days of price ranges that exceeded 20%.  The volatility has been fueled by press releases from the company and strength in the biotech sector.  The iShares Nasdaq Biotechnology ETF $IBB is a fund comprised of biotech stocks.  The fund was up over 20% on the year at it’s peak on March 20th, 2015.   Novogen specifically is a pharmaceutical company with business in Australia.   The company manufactures drugs developed for the treatment of cancers including abdominal cancers , ovarian cancer, and pancreatic cancer.  Novogen was founded in 1994 and has a market capitalization of 113mil and an outstanding float of just under 9mil shares. The small cap bio stock is a favorite among active day traders and swing traders who look to profit from short term volatility.


Novogen Limited Press Releases

Novogen Limited (NASDAQ: NVGN) issued a press release on April 17th in Sydney, Australia stating the company has signed a Memorandum of Understanding with the Feinstein Institute for Medical Research to work together in the development of treatments for brain cancer.  This headline pushed shares up over 10% before the opening bell in New York. At the heart of the collaboration is the Company’s super-benzopyran (SBP) drug technology platform, distinguished by its ability to kill the full spectrum of cells within a tumor including both rapidly- and slowly-dividing cancer cells (tumor-initiating cells).  This most recent press release is only the latest in a series of frequent releases from the Company.


The Topping Tails of Novogen




Throughout the spring of 2015 The company has issued positive statements on a nearly weekly basis.  Many investors take these headlines as opportunities for quick trades.  Both long and short biased traders have used the stock as a vehicle for profits.  In the period of three months the stock has made top to bottom moves of over 50% inside the course of five trading days on seven different occasions.  Many of these moves are marked by a long upper wick, or Topping Tail, as noted on the daily chart.  In the past stocks that experience periods of high volatility go out of favor among traders as the impacts of press releases become less profound.  This will likely be the case for Novogen in the second quarter of 2015.


A Year for Biotech Stocks

This year has been extremely good for biotech stocks and I expect to continue to see stocks in this sector with positive press releases to be among the most volatile stocks in the market.  The large range days attract investors looking for quick profit opportunities.  It’s important to recognize that the short term profit potential must be balanced by the higher level of risk associated with stocks in this sector.  A negative press release can easily knock a small cap stock down 30-40% overnight.  This makes biotech funds like the $IBB popular for savvy investors looking to be part of the sector but minimize single stock exposure.