KemPharm, Inc. (KMPH) shares rose more than 10% by Friday afternoon after the company reported positive top-line results from the first of three pivotal human abuse clinical trials for KP415. The prodrug of d-methylphenidate for the treatment of attention deficit and hyperactivity disorder (ADHD) is designed to lower potential abuse compared with stimulant-based ADHD products, which could make it a go-to prescription within the multi-billion-dollar industry.
In the clinical trial, researchers found that the prodrug was not readily converted into the active d-methylphenidate when injected, and as a result, it produced pharmacodynamic effects that were comparable to placebo endpoints. The results suggest that KP415 and KP484 could have significant potential in the market given the lack of potential for abuse. The news comes as the company reported a loss of $1.77 per share loss in the first quarter and could be a "going concern." (See also: Evaluating Pharmaceutical Companies.)
From a technical standpoint, the stock moved sharply lower through April amid concerns about its solvency but rebounded following the positive clinical trial results. The relative strength index (RSI) moved to neutral territory with a reading of 54.02 while the moving average convergence divergence (MACD) experienced a bullish crossover. These indicators suggest that the stock could have some room to run over the coming sessions.
Traders should watch for a breakout from pivot point resistance at $6.02 and the 50-day moving average at $6.29 to R1 resistance at $7.13. If the stock fails to break out, traders could see a move lower to retest trendline support at around $5.00 or the 200-day moving average at $4.64. The wide range of $4.50 to $8.00 could make the stock attractive to active traders looking for a momentum play following the positive results. (For more, see: 4 Top Pharmaceutical Stocks for 2018.)
Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.