Access Update- #59

Just moments ago, Electro-Optical Sciences (Nasdaq: MELA) said the phase III trial is now closed, all of the data has been received and is undergoing third party validation. The results should be announced in the next several weeks.

In last week’s update, I mentioned that institutional investors were likely selling shares of MELA in order to meet redemptions. Other investors, spooked by the ugliness in the markets, also fled to safety rather than owning speculative names.

This sparked an excellent question from subscriber B.C., who writes:

I am very worried about the price action in the last several weeks of my
holdings in MELA. As you know, most times in the expectation of favorable
news, a stock will give a hint whether the news will be good or bad. It
seems that the closer we get to the announcement, MELA seems to get closer to
its 52 week low. Are you absolutely sure that the company is being
forthright with you or are they doing what so many on Wall street are doing
nowadays – lying through their teeth?

B.C. is right that often a stock will start to inch up ahead of good news as the “smart money” accumulates shares. However, we must remember this isn’t the kind of market where that scenario is likely. Even when the smart money accumulates shares, there are too many frightened sellers desperate to dump their stock.

But the smart money has been buying lately. CEO Dr. Joseph Gulfo picked up another 5,000 shares and Dan Lufkin, an early supporter of MELA, purchased 10,000 shares. These transactions were made in the open market and were not options related.

As far as being “absolutely sure that the company is being forthright”, keep in mind that all scientific data has been published in peer-reviewed journals as well as reviewed by the FDA. Until just before the phase III data is released, MELA’s management won’t know the outcome of the trial either.

I certainly can’t guarantee that MelaFind will hit its target in phase III trials. If it doesn’t work, I don’t believe that management was up to anything nefarious. Again, the phase II data was accepted in the medical community without controversy.

I remain confident in the technology and the stock, the current trading activity notwithstanding.

We will get phase III data in the first quarter of 2009 from two companies involved in melanoma – MELA and Synta Pharmaceuticals (Nasdaq: SNTA). Though I expect them both to be successful, we probably only need one of them to make our entire melanoma play very profitable.

On another note, I hope you and your family have a healthy, happy and prosperous new year. My team and I are working hard for you to try to ensure the prosperous part.

Marc Lichtenfeld
Director of Research
Access Research Group

Current Portfoli

Name: Rochester Medical
Symbol: ROCM
Current Price: $14.92
Comments: Buy up to $15.00

Name: SIGA Technologies
Symbol: SIGA
Current Price:$3.23
Comments: Buy up to $4.00

Name: Synta Pharmaceuticals
Symbol: SNTA
Current Price: $5.03
Comments: Buy up to $13.00

Name: ViroPharma
Symbol: VPHM
Current Price: $13.25
Comments: Buy up to $12.50

Name: Cytori Therapeutics
Symbol: CYTX
Current Price: $3.20
Comments: Buy up to $8

Name: Electro-Optical Sciences
Symbol: MELA
Current Price: $2.68
Comments: Buy up to $5.75