Leading Loser - BioMimetic Therapeutics (Nasdaq: BMTI)

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In Tuesday’s trade, there were many big losers, but the leading loser in terms of market capitalization, was BioMimetic Therapeutics (Nasdaq: BMTI). The stock shed 35.32% of its value, or $4.73, on its way to close at $8.66. We've sifted through the public information available and think we've pinpointed the reason for decline. Perhaps we've also shed light on what lies ahead for the company and stock.

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Leading Loser: BioMimetic Therapeutics (Nasdaq: BMTI)

The company reported results Monday, but that was likely not the reason for its precipitous decline. Rather, speculation may have turned sour around BMTI’s Thursday scheduled meeting of the Orthopaedic and Rehabilitation Devices Panel of the Medical Devices Advisory Committee around the company’s Augment Bone Graft. On May 12, 2011, the committee will discuss, make recommendations, and vote on information related to the premarket approval application (PMA) for the Augment Bone Graft, sponsored by Biomimetic Therapeutics, Inc. The intended use of the device is as an alternative bone grafting substitute to autologous bone graft in applications to facilitate fusion in the ankle and foot without necessitating an additional invasive procedure to harvest the graft.

If expectations for a positive committee meeting result, which could lead to faster FDA approval, were built into the shares, it seems fear or fact helped to remove some of that expectation Tuesday. The Associated Press reported that information on the FDA’s website implied the advisory panel might not recommend BioMimetic’s treatment for near-term approval. We’re not sure exactly which material on the FDA’s website AP is citing as they did not link to it in the article, but we expect it was not the one we have linked to here. Perhaps the AP is referring to the findings that the FDA said it would publish two days ahead of the meeting, which we could not locate on the FDA’s site. If there is no data, perhaps the market is simply reacting to the lack of it, and reading into that. AP refers to specific arguments though, but we wonder if they do not represent old information. We’re putting a call into the company and FDA today, and will update this article if we discover the document referred to here or receive other useful insight. The company will be greatly restricted to information it can provide, given the pending news, but we're just looking for the public FDA data which is supposedly behind the stock's move on Tuesday.

We did not find the material that we reviewed convincing anyway, and the company’s CEO stated in BioMimetic’s earnings release that he expected approval later this year. We would not expect anything less from a biased insider. Yet, AP notes incomplete trials and inadequate data, which certainly could delay progress toward approval.

When a company’s future seems to hang on only one product, as seemingly evidenced by the stock movement, the commensurate risk can drive high volatility in those shares. Perhaps BMTI is just further away from approval though, rather than impending rejection, in which case the shares should eventually recover, keeping all other things constant and assuming it had the capital to keep the timeline. It would seem though that the risk is being properly discounted on this important event, but that does not necessarily say it will prove correct or not, or whether shorts or longs will win out. One things seems certain, the stock is going to keep moving this week, especially Thursday and Friday after the FDA meeting. The question is, which way will it move?

It appears the company’s cash might last it for less than two years, so the approval process is critical to its ability to raise further capital and to market its leading offering. Without a positive response Thursday, BioMimetic’s access to capital might be less fluid as well.

As far as its results went, BMTI’s revenues came in higher than the average of three analysts’ forecasts at Yahoo Finance (Nasdaq: YHOO), but short of the high estimate. Still, that is far less important than the approval of this Augment Bone Graft application. Clearly, at this stage of development, the approval process is the hinge between open or closed capital markets, growth or decline, and finally profit or loss.



Other price losers included North American Palladium (AMEX: PAL), SmartHeat (Nasdaq: HEAT), Nanosphere (Nasdaq: NSPH), Universal Display (Nasdaq: PANL), Recon Technology (Nasdaq: RCON), ADA-ES (Nasdaq: ADES), Horizon Lines (NYSE: HRZ), Energy Conversion Devices (Nasdaq: ENER), ADDvantage Technologies (Nasdaq: AEY), Beasley Broadcast Group (Nasdaq: BBGI), First Federal Bancshares of Ark (Nasdaq: FFBHD), USANA Health Sciences (Nasdaq: USNA), MannKind (Nasdaq: MNKD), Sky-Mobi (Nasdaq: MOBI), Bank of Granite (Nasdaq: GRAN), Orsus Xelent Technologies (AMEX: ORS), Baldwin Technology (AMEX: BLD), Astrotech (Nasdaq: ASTC), Grupo TMM S.A.B. New American (NYSE: TMM), Entercom (NYSE: ETM), iPath Short Extended Russell 2000 ETN (NYSE: RTSA), Trunkbow International (Nasdaq: TBOW), InsWeb (Nasdaq: INSW), Airmedia (Nasdaq: AMCN), Vermillion (Nasdaq: VRML), Bank of the Carolinas (Nasdaq: BCAR), Diodes (Nasdaq: DIOD), Sonesta International (Nasdaq: SNSTA), CTI Industries (Nasdaq: CTIB), Paulson Capital (Nasdaq: PLCC), BankAtlantic Bancorp (Nasdaq: BBXT), USA Technologies (Nasdaq: USAT), Boston Scientific (NYSE: BSX), Renren (Nasdaq: RENN), C Tracks Exchange Traded Notes (NYSE: CVOL), MDC Holdings (NYSE: MDC), Molycorp (NYSE: MCP), NetQin Mobile (NYSE: NQ), Youku.com (Nasdaq: YOKU), GMX Resources (Nasdaq: GMXR), BRF-Brasil Foods (Nasdaq: BRFS), American Oriental Bioengineering (NYSE: AOB), Sotheby’s (NYSE: BID), GATX Preferred (NYSE: GMT-P), Dolan (NYSE: DM), China Ming Yang Wind Power (NYSE: MY), China Mass Media (NYSE: CMM), Qihoo 360 (NYSE: QIHU), Dice Holdings (NYSE: DHX).

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