Nexus Biopharma Inc (OTCMKTS:NEXS) has been pushing higher in recent weeks following the very public dissemination of the fact that the stock is the new promotional focus of Traders’ Choice group. The promotional organization has been very successful at ramping their focal stocks over a limited period of time. But the magic wears off at a certain point, and some investors and traders get left holding the bag with massive losses.
The last such pick was XLIT, which ramped over 500% in two-plus months, then spent a few months in a sideways range before crashing lower more than 95% in subsequent action. This has been a pattern for the group, and one might already expect a “life cycle” for the NEXS play. At present, we appear to be in the growth phase, with the stock up a bit more than 110% in the past month on an influx of trading volume surpassing the stock’s longer run average by nearly 90%. But traders are urged to avoid complacency if involved.
Nexus Biopharma Inc (OTCMKTS:NEXS) trumpets itself as biotech based in Montclair, New Jersey that is developing “a revolutionary new weight loss drug that works by adjusting the body’s metabolism to increase the burning of fat by activating the AMPK metabolic pathway, the same pathway activated by intense physical exercise.”
The underlying biochemistry was described in an article in the journal Cell Metabolism by Claire C. Bastie, and Jeffrey E. Pessin, entitled “FYN-Dependent Regulation of Energy Expenditure and Body Weight Is Mediated by Tyrosine Phosphorylation of LKB1”. Cell Metab. 2010 Feb 3;11 :113-24.
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According to the Company’s materials, “in completed pre-clinical trials of the pharmaceutical activation of this pathway, test subjects showed reduced fat mass with no loss of lean muscle mass, plus a higher rate of energy expenditure, increased insulin sensitivity, increased fatty acid oxidation, improved plasma and tissue triglyceride levels, with lower cholesterol. Upon translation of this pharmaceutical activation to humans, these effects are expected to have a significant impact on obesity and diabetes.”
The materials go on to state that “Using the most advanced high throughput screening technology, Nexus BioPharma has identified small molecule compounds in a number of discrete chemical structure families that can efficiently activate the pathway. The Company has filed for intellectual property protection on a selection of compounds in a number of discrete chemical backbones. The Company’s goal is to advance to pre-IND trials in preparation for FDA human trials of a drug that is touted as capable of safely mimicking this effect in humans.”
On the positive side, the Company looks to have assembled an excellent scientific advisory team in recent months with very credible membership in all key areas. But we would caution: there is at present no concrete proof or guarantee that any such drug will ever exist in any form that has sales potential. It may happen. But there is no concrete proof of product-market relationship. There is just a very early stage set of IP and a compelling narrative.
It is also true that the target market is an explosive growth space with few perfect solutions at present and may represent an excellent opportunity. But there is a long road ahead. From their press releases, it would appear that the Company is still involved in Pre-IND activity, and does not expect even to get to filing an IND application with the FDA until the end of next year (2017). These are all points to keep in mind.
Now commanding a market cap of $39.2M, NEXS has been pushing higher on the strength of its beneficial relationship to the Traders’ Choice group promotional efforts, and we urge caution in handling this stock.
NEXS is likely to play out like a game of musical chairs: Enjoy the game while it lasts, but find the exit before the music stops. Due to the promotional group’s highly visible blow up in XLIT earlier this year, the music may not last as long as used to but could continue for some time considering the volume and momentum here. It’s not impossible that some of those complaints bear fruit to the detriment of NEXS. If you want to try to surf the wave in this stock you can, just don’t get complacent. And make sure to keep an eye out for our next update on this very interesting situation. For continuing coverage on $NEXS and our other hot stock picks, sign up for our free newsletter today and get our next hot stock pick!