Over the past few weeks, Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX) and Decision Diagnostics Corp. (OTCBB:DECN) have dominated the diabetes diagnostics and diabetes treatment landscape. Shares of LXRX jumped 20% on Tuesday following news that one of the key drugs in its pipeline showed more than enough efficacy in its clinical trials. DECN shares are up more than 250% on the heels of an almost-assured victory in its patent lawsuit against industry giant Johnson & Johnson (NYSE:JNJ). Anyone looking for a new trade in the diabetes diagnostics space, however, may want to look past overbought Lexicon Pharmaceuticals and Decision Diagnostics at this point, and instead turn their attention to newly-budding Neurometrix Inc. (NASDAQ:NURO).
NURO isn't a new company. In fact, it's been around since 2004, developing a variety of diabetes diagnostic and pain management equipment. Its latest iteration on the diabetes testing front is the NC-stat/DPNCheck device ('DPN" is short for diabetic peripheral neuropathy, which is the condition that caused foot pain and foot ulcers). By determining when/if DPN is developing, Neurometrix Inc. is helping many diabetes stave off monumental complications.
Also on the NURO menu is the wrap-around, pain-reducing device called the Sensus. Worn like a bracelet around the top of the calf, the Sensus sends out an electrical pulse to stimulate the nerve, which blocks the pain transmission.
Neurometrix's products aren't the key reason NURO shares are worth considering over competing companies like Decision Diagnostics Corp. and Lexicon Pharmaceuticals, Inc. today, however. No, the reason NURO is buy-worthy right now is far simpler... the chart.
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Although it's in the red today, the bulls have already done all the technical damage they needed to do to rock Neurometrix out of a bearish rut and kick-start a new uptrend. The chart below tells the story, though it doesn't do the rebound justice. Not only have shares wiggled their way above a resistance line (red) that goes all the way back to the middle of last year, with the strength from yesterday's push, NURO shares are trading above their 100-day moving average line (gray) for the first time since August of last year. And even in August of last year that was a short-lived satiation. Really, the stock hasn't been above the 100-day line in a meaningful way since - and not with this much bullish progress - since late 2010. This small, subtle shift IS a big deal.
The odds of more upside being doled out here, of course, still hinge on good news from the company to keep traders interested, and buying. What do things look like on that landscape? Actually, quite compelling. Aside from taking a little (ok, a lot) more interest in publicity-generating events like biotech conferences, Neurometrix Inc. has also signed a distribution deal with a company that's got a far wider reach than it could ever create for itself on its own. Though this deal is only for the Sensus device right now, it shows that the company is willing and able to do new things to expand its revenue opportunities. The market seems to be picking up on the news' undertones and unspoken potential as much as it is the announcement itself. It's the kind of thing that helps a stock get, and keep getting, traction. Point being, we can take the stock's paradigm shift at face value.
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