The trading frenzy in Biomerica Inc. persisted Thursday, as the small biomedical firm’s common stock lost 46% of its meteoric gain from the day before.
The Newport Beach company’s stock had quadrupled the previous day after the company announced plans to produce a test to detect one of the early warnings signs of prostate cancer.
Shortly after Nasdaq trading opened Thursday, the stock inched up 92.5 cents to $10.675, but then gyrated downward throughout the day to close at $6.375, off $3.375. Nearly 1.9 million shares changed hands, much less than the prior day’s volume but still dwarfing its recent daily trading average of 16,000 shares.
Analysts attributed the stock’s two-day run-up and retreat to speculators who seem ready to jump into a stock on any bit of news in hopes of making a quick killing.
“There’s a big gambler element running through the stock market today,” said Jeff Kilpatrick, president of Newport Securities Inc. in Costa Mesa.
Many of the speculators likely are small investors who have been unable to get in on the recent rash of hot initial public offerings of stock, and are seeking similar returns elsewhere, he said. However, there were numerous trades of blocks exceeding 10,000 shares, including one 500,000-share block, suggesting that large investors were involved as well.
The Internet also has been filled the last two days with electronic chitchat about the stock, as investors grew at first excited, then became disenchanted as the stock tumbled.
Analysts and medical experts continued to express amazement at investors’ reaction to the company’s announcement that it plans to produce a five-minute diagnostic test that can be administered in a physician’s office. The test, which hasn’t cleared the Food and Drug Administration and has yet to be introduced overseas, is based on a technology that’s in widespread use, can be easily copied, and produces questionable results, medical analysts say.
“There is nothing proprietary about the product,” said John McCamant, associate editor at Medical Technology Stock Letter.
Joseph Irani, Biomerica’s president, said the test is intended to pre-screen patients for the presence of prostate specific antigen, a sign of prostate cancer and other less serious ailments.
Irani estimated that the test will cost less than $20, making it much cheaper than more thorough tests that require laboratory analysis.
Irani, who owns 20% of Biomerica’s stock, would not say whether he had traded any shares this week.