Shares in small-cap maker of radiation treatments for cancer IsoRay (ISR) exploded on Mar. 19, soaring over 80 percent on extremely high volume. The move appeared to be motivated by news that the company had used its novel Cesium-131 brachytherapy technique to treat an aggressive form of cancer in a pediatric patient.
Wild Trading Action on ISR Despite Small Size
The news began to filter out after the opening bell, and IsoRay’s stock opened at the about same price it closed at on Tuesday. However, volume began to pick up after 10 am EST and continued gaining steam. The price peaked once at over $1.70 a share before retreating, then rallied past that level to clear $2 a share by 2 pm EST.
This resulted in the stock crashing through a rising resistance level at $1.20 that had formed in mid-August, been tested twice, and had appeared to tamp down trading action over the last few days as the stock crossed and then retreated from $1.20 a share in trading on Mar. 17. It’s possible that the size and scope of the breakout was buoyed by the stock finally breaking through this technical barrier.
Volume was incredibly high for a company of this size, with over half of the 41.5 million share float changing hands prior to 1 pm EST and movre than 20 million shares moved by 2 pm EST. The move comes less than a week after a bullish article prompted another spike in value of more than 25 percent.
A company as small as IsoRay is clearly prone to major price swings, with the shift last Friday stemming from a single internet piece being a prime example. However, IsoRay is clearly picking up steam and garnering more interest over the last few weeks. Its average daily volume prior to Wednesday had reached 3.3 percent of float, meaning shares were already turning over at a fairly rapid rate before Wednesday’s massive spike in volume.
IsoRay’s price action is also interesting in the context of the large divestment from institutional ownership over the last three months. IsoRay saw a 40 percent decline in institutional ownership over the last three months, potentially meaning that there are some extremely disappointed institutional stock-pickers out there Wednesday morning.
ISR Holds Monopoly for Novel Cesium-131 Brachytherapy Process
The reported success on Wednesday involved a pediatric patient with a recurrent metastatic Wilms tumor, a particularly aggressive cancer affecting the kidney that’s found in children. Dr. Anthony Crimaldi at the Levine Cancer Institute of Charlotte, NC reported that he was able to treat the tumor using the Cesium-131 treatment developed by IsoRay.
Brachytherapy, also known as internal radiotherapy, is a form of radiation treatment in which sources of radiation are placed in the body to give tumors high doses of isolated radiation.
“Prior to this he had been treated extensively, but nevertheless the cancer returned,” said Crimaldi. “I worked closely with IsoRay to design a custom mesh containing Cesium-131 sources and we were able to place the mesh at the time of surgery so as not to expose critical organs to high doses of radiation (lung, spinal cord, and aorta). Post-treatment dose calculations were performed confirming the delivery of dose to the resection bed and sparing of the critical structures. The patient recovered normally and has been discharged home.”
IsoRay is currently the only company using the Cesium-131 isotope for these types of treatments, potentially giving them a monopoly in the space.
"When cancers become locally advanced, they recur frequently after surgery,” said Chairman and CEO Dwight Babcock. “Radiation is therefore performed, but the amount of radiation required to successfully treat the disease is often limited with existing technologies and has the potential to increase negative side effects to the patient. With the Cesium-131 seeded mesh we can get the optimal dose to the area of concern at the time of surgery -- which we think is a real benefit for the patient."
Excitement over the potential for this form of treatment becoming used more broadly is likely creating much of the buzz surrounding IsoRay.
Crimaldi pointed out that “the process of designing the treatment mesh was done with the assistance of the IsoRay team, and was quick and simple (done with the use of cross-sectional imaging).” He continued: “The mesh was designed, manufactured, and arrived for placement in less than 1 week. This device is an option that can provide treatment in areas of prior irradiation with a dose that is highly conformal and spares normal critical structures when other treatment modalities (such as external irradiation) are not possible."
Low but Consistent Revenue for a Tiny Company
It’s likely going to take some time for the markets to really sort things out for IsoRay. It’s not uncommon for a company with a float and market cap as small as IsoRay’s to have huge price swings following news items. However, it’s important to note that any stock that can leap this much so quickly can typically swing to the negative just as fast.
Looking past the incredible volatility of the last few months, IsoRay has posted small-but-consistent losses on small-but-consistent revenue for years. The company typically pulls in between $1 million and $1.25 million in revenue each quarter, and FY earnings since 2011 have shown a loss of $0.11 or $0.12 a share, down from a loss of $0.18 a share in 2010.
These sorts of results show a company that has yet to see the sort of action that will really define its valuation. Should the promise currently being shown by its Cesium-131 brachytherapy pan out, the company’s stock may climb even higher. However, given the tiny float, share price, and market cap, this sort of wild volatility could just as easily fizzle if the long-term value of this treatment fails to pan out.
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