Biomerica’s Stock Quadruples After Test Kit Revealed
The stock of Biomerica Inc., a small maker of medical diagnostic test kits, soared fourfold Wednesday in a trading frenzy over news that it is poised to produce a quick and easy method to detect one of the early warning signs of prostate cancer.
Biomerica stock rocketed $7.375 a share to close at $9.75 on the Nasdaq market system. Nearly 3.6 million shares traded hands Wednesday, dwarfing the recent daily average of 16,000 shares. For the past year, the stock had been trading in a range of $1 to $3 a share.
The sharp rise is certain to set off alarms at the National Assn. of Securities Dealers, which regulates the Nasdaq market, and trigger a routine inquiry about why the stock price of the tiny Newport Beach company shot up.
The reason, as far as brokers and industry analysts are concerned, was the company’s statement that it has come up with an inexpensive product that, in five minutes, can use a few drops of a patient’s blood to test for prostate specific antigen (PSA), an early warning indicator of prostate cancer.
The company said in a prepared statement that it plans to seek approval from the Food and Drug Administration and, in the interim, to begin marketing the product, called EZ-PSA, overseas. Joseph H. Irani, the company’s president, refused to comment on the press release or the unusual stock market activity.
Biomerica said in its statement that more than 200,000 new cases of prostate cancer will be diagnosed this year in the United States and that about 40,000 men will die from the disease. Prostate cancer is the No. 2 killer of men nationwide.
Biomerica’s PSA test is designed much like a pregnancy test kit, except that it uses drops of a patient’s blood. A rosy purple on the color band indicates PSA is present.
PSA testing isn’t very accurate, analysts said, because the antigen doesn’t always lead to cancer, but it’s the only viable test. Making it a quick, easy, inexpensive in-office procedure could be a boon for Biomerica, though analysts said it could take a year to get FDA approval.
“That’s a fine little company with a conservative management team,” said Angus Macdonald, an analyst at the Boston office of New York’s Fahnestock & Co., one of several brokerages that make a market in Biomerica stock.
The company has posted modest profits in the last two fiscal years, Macdonald noted, but he was skeptical about the price surge. “A quadruple run-up in price? I don’t think it’s warranted,” he said.
He pointed out that other companies are developing technologies that don’t rely on PSA to detect prostate cancer. “I do caution investors that there are many, many things in the pipeline to replace PSA,” he said.
Other analysts, who don’t know much about Biomerica, agreed that PSA testing was imperfect. But, as San Francisco analyst David K. Crossen said, “it’s the only game out there.”
“The real issue is that with a five-minute test that is a more convenient and more easily obtained, they can get a piece of a $250-million market,” said Crossen, of Montgomery Securities.
Others believe Biomerica has the right idea.
“One of the hot areas right now is point-of-care diagnostics--moving what was once in the lab to the physician’s office,” said John Calcagnini, an analyst at Oppenheimer & Co. brokerage in Los Angeles.
Calcagnini said investors have shown “a lot of excitement” over a number of companies that are reducing extensive and expensive laboratory tests to quick procedures that can be performed in the doctor’s office.
Biomerica couldn’t have asked for a better atmosphere on Wall Street, analysts said.
“In the kind of markets we have been involved in for the last year, the public is clamoring for everything Internet and biotech,” said analyst Aaron Lehmann of M.H. Meyerson & Co., a Jersey City, N.J., brokerage that also makes a market in Biomerica stock.
“People very often bid up stock prices to outlandish levels even though it may be months or years before they see any returns,” he said.
Irani, who owns 20% of Biomerica, certainly has waited years to see his company take off.
He founded it in 1971 as Nuclear Instruments Inc., changing the name first to Nuclear Medical Systems to reflect the radioactive isotopes it used in developing test kits and then to NMS Pharmaceuticals. In 1987, he changed the name again to Biomerica to reflect the company’s expansion into development of biological substances for fighting infectious diseases like AIDS and herpes.
The company, however, remains mainly a maker of diagnostic test kits to detect conditions ranging from allergies to heart attacks and pregnancies. It owns 73.5% of Allergy Immuno Technologies Inc. and 30.5% of Lancer Orthodontics Inc., companies that make some of the products.
In the 1990s, the company’s sales have grown slowly but steadily, and it turned its red ink into black. For the fiscal year that ended May 30, 1995, it earned $100,000 on $9.2 million in sales. It hasn’t released this year’s results yet, but for the first nine months, it earned $225,622 on sales of $6.7 million.
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Stock Trend
Biomerica’s stock, which traded in the $1 to $3 range for the past year, has been relatively quiet recently. But it quadrupled Wednesday when investors scrambled to buy shares after the company announced a new product that it says detects the early signs of prostate cancer.
June 12: $9.75
Source: Bloomberg Business News
