Stock Insight

RNAI - Sirna Therapeutics Inc. (Nasdaq:GM) Company website:
http://www.sirna.com

Closed at $5.55, up .13, on Friday. Below is a description of what they do from Yahoo!:

Sirna Therapeutics, Inc., a biotechnology company, develops therapeutics based on RNA interference (RNAi) technology. It engages in the research, preclinical, and/or clinical development with product candidates in the various areas, including age-related macular degeneration (AMD), chronic hepatitis, dermatology, asthma, Huntington’s disease (HD), oncology, and diabetes. The company offers Sirna-027, which completed phase I clinical trial is used for the treatment of AMD; Sirna-034, which is under preclinical stage is used for the treatment of hepatitis C virus; and various drugs under preclinical stage of development for asthma, HD, chronic hepatitis, diabetes, and dermatology. It has strategic alliances with Allergan, Inc., Eli Lilly and Company, Targeted Genetics, Protiva, Archemix Corporation, and GlaxoSmithKline. The company, formerly known as Ribozyme Pharmaceuticals, Inc., was founded in 1992 and changed its name to Sirna Therapeutics, Inc. in 2003.

This is obviously a bio-tech company. I discovered this stock when I was reading an article by TheMotleyFool on GNTA this week. That company ran into some trouble this week when an FDA advisory committee voted not to recommend Genta’s lead drug, Genasense, for approval. The article mentioned that Genta’s technology for attacking cancer is becoming obsolete, and being replaced by a new more potent one. It mentioned that this newer technology is being developed by RNAI and ALNY. I took a look at both of these company’s and liked RNAI better technically. There are other positives as well.

One of those positives is their current cash position, and debt situation. They have $92 million in cash, and no debt. Their burn rate is about $30 to $33 million a year. $47 million of that cash came from a stock offering at $5 a share, which considering the current price, is not bad. Additionally, per their last quarterly earnings announcement, the CEO said:

“With over $92 million in financial resources at the end of the quarter, no debt, and the potential for additional collaboration revenues, we believe that we are in an excellent financial position to execute on our strategy, in just a short period of time, we have established valuable strategic collaborations with Allergan and GlaxoSmithKline, and we are confident that we will have continued success in our strategy of establishing increasingly valuable collaborations with companies that are leaders in their fields.”

The key things I took away from that were the current and future strategic partnerships. I think partnering with a big company like Glaxo was huge for them, not only does it help legitimize their drug’s potential, but it has already gained them $12 million in up-front payments. The fact that the CEO feels that more of these partnerships are forthcoming, is very positive. See link to earnings PR below:

Sirna Therapeutics Reports Second Quarter 2006 Financial Results

TheMotleyFool also wrote a good article specifically on the company back in mid-August. Some of the key highlights were that RNAI recently completed a successful phase 1 trial for Sirna-027, which is directed at age-related macular degeneration (AMD), and are expected to progress to phase 2 later this year. Their chief rival ALNY had to halt a similar study this year. Additionally, the article also mentioned that the company’s therapeutics’ preclinical pipeline is robust. Sirna-034, directed at hepatitis C, should enter the clinic after the completion of its investigational new drug filing, expected later this year. In addition to Sirna-034, the company also has pre-clinical programs directed at treatments for Huntington’s disease, hair removal, and diabetes. See link to article below:

Sirna Battles Genes Gone Bad

Some other items of note, are that there was an insider buy of 15,000 shares at $5.05 back in May. That was the most recent transaction. Additionally, institutional ownership grew by 14.4% last quarter. Lastly, a number of analysts follow this one, and all of them have favorable ratings on the stock. The latest was a “buy” recommendation on August 24th.

As I mentioned earlier, I chose this stock over a similar one based on technicals. Looking at that recent history, the stock was as high as $8.52 in late April (the 52-week high), and $8.28 in mid-May, before it began to pullback with the rest of the market in late May. It continued to pullback along its declining 50 DMA line until mid-August, when it dropped to its lowest level since the beginning of the year at $4.15. Since that time the stock has made an excellent rebound, as it has climbed above the 20 day EMA, 50 DMA, 200 DMA, and the negative trend line. This price action has been able to flatten that 50 DMA line, which is a good sign. See current chart below:

Looking at the chart, the MACD is declining while in positive territory, as the stock is now re-tracing towards good support in the $5.25 to $5.33 area. It is still far from making the MACD bearish crossover, and with it nearing that support area, I think there is a good chance it will turn back up prior to making that crossover. $5.33 is the 200 DMA, so the stock may hold there, however, there is also great support at $5.25 (see chart). The positive trend line is also in that area. I would think a buy in that $5.25-$5.33 area would be favorable. If somehow $5.25 were to break, the next support mark is $5.00, which is not only the 50 DMA, but the price of the most recent equity financing deal. I feel pretty confident that that mark should hold. The first resistance level for the stock to get through on the way up is $5.75, followed by $6.00. If the support levels I mentioned above hold, I think we can reach that last target easily.

In summary, we have a company that is involved in some exciting technology, that could announce partnerships or new clinical trials at any time, whose stock looks good technically.

Stock Insight, September 9, 2006

Remember to check back tomorrow for the weekly Stocks to Watch list.