Opinion on  Monogram Biosciences Inc. (MGRM)     Sector: Healthcare  >  Industry: Biotechnology & Drugs
Monogram Biosciences Expectations Too High!

There were a lot of frustrated traders on the MGRM boards today blaming the market makers and shorts for manipulating the stock price and the company for not enough PR.  Longs (including myself) were hoping this drug would be used across the full spectrum (or at least half (500K)) of US HIV/AIDS patients.  Bottom line is that we can only expect 40K to use the drug in the US this year. 

The good news is that this is still significant new revenue for the company.  $100 per test initially would not be out of line.  Many existing HIV/AIDS test are in the $50-70 range.  This would give us an additional $4M in new revenue (8.5%).  Also, don't forget the world HIV/AIDS population (39.5M).   Approval in Europe will soon follow.

Additionally, the company has a steady stream of orders coming as both Schering-Plough and Merck are in late stage trials of their drugs that will be using Monogram's testing services.  Revenue will pick up as the late stage trials bring in more patients.   

Finally, we have not even discussed their eTag applications targeted at the cancer market.  There is a lot of upside potential with this stock.  This is a great company with solid management and great earnings potential.  Investors will be rewarded handsomely for staying with the company.  Speculators took a chance over the last few days and missed.  You have to earn your money in the market. 

The signals were all there for a slow roll-out as a result of the safety concerns.  Several analysts pointed this out.  Personally, I just didn't connect the dots until it was too late.  We only have ourselves to blame for missing the signals.  I won't make that mistake again.  The system is working.

Over the last several days, MGRM's stock price has declined more than 10% following what would normally be considered good news.  Day traders flocked the stock hoping to make a quick buck.  Once it was determined that an instant reward was not forthcoming the stock dropped sharply.  The stock has returned to normal volume yesterday and today but what is extremely interesting is the continued behavior of the individual investors of this stock.   Here is my assessment of what is taking place.

The vast majority of trades today are retail (not institutional).

Heavy retail selling is still taking place at the moderate $1.92 and $1.95 resistance levels. These are the individual investors mimicking the large volume activity that we have seen over the last few days.

Resistance is very weak once we break through the $1.95 level. The pps should easily move higher following the break-out. Assuming of course we have enough volume to support the move.

Given today is Friday, folks don't want to hold through the weekend. Many traders are following typical crowd behavior patterns, licking their wounds and irrationally exiting at these levels.

Wise investors are holding or accumulating additional shares.

MGRM is approaching $1.81 (a strong support level) this morning.  This support level holds a confluence of 16 which will be difficult to breach.  If the support level can be maintained we can expect the stock to start its turn up soon. 

This event also corresponds with the press conference scheduled to discuss Trofile and quarterly results tomorrow after the market close.

If you are bullish, now may be a good time to buy shares.