Monday, February 14, 2011

Vical Incorporated (NASDAQ:VICL) Q1 2011 Analysis

Recent price: 1.74$
P/E Ratio: -
3 months Target Price: 2.25$

Company Description
Vical Incorporated researches and develops biopharmaceutical products based on its deoxyribonucleic acid (DNA) delivery technologies for the prevention and treatment of serious or life-threatening diseases. The Company has five active independent clinical and preclinical development programs in the areas of infectious disease and cancer, including a fully enrolled Phase III clinical trial using the Company’s Allovectin-7 immunotherapeutic in patients with metastatic melanoma; a fully enrolled Phase II clinical trial using TransVax, its cytomegalovirus (CMV), therapeutic DNA vaccine; completed Phase I clinical trials using its Hemagglutinin Type 5 and Neuraminidase Type 1 pandemic influenza DNA vaccine formulated with its Vaxfectin adjuvant; a preclinical program using its H1N1 pandemic influenza DNA vaccine formulated with its Vaxfectin adjuvant, and a preclinical program using its CyMVectin prophylactic vaccine formulated with its Vaxfectin adjuvant.

Confidence Margins
Strong resistance $4.05 (+133%)
Light resistance $2.33 (+34%)
Light support $1.70 (-2%)
Strong support $1.48 (-15%)

Vical corporation saw it's stock price plunge because of an ill timed public offering of common shares. The company decided to issue 15 million shares at a price of 2.25$ and accordingly, the stock price went to those levels. Although the share issuance provoked some dilution, it is certain that a drop of nearly 50% in the stock price is far from the recent value of the company. Except for the recent quarterly results, there has been no material change to the operations of the company, which leads to think that there is a lot of upside left in this stock.

Entry strategy
For the cautious investor:
The best thing to do here is suggested to initiatiate a long position. The stock should be acquired for less than 1.80$.

For the risk-taking trader:
The June 2011 2.50$ call option contract seems to be the right position to take, they can be acquired for 30$ per contract.

Exit Strategy
For the cautious investor:
Sell when the stock reaches 2.30$, or keep it until 3$ if the stock crosses the light resistance level.

For the risk-taking trader:
The contracts should be kept until the underlying reaches around 2.30, as for the cautious investor.

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