Nasdaq-listed Novogen Limited (NVGN) skyrocketed more than 214.6% on Tuesday.
Novogen closed the trading day at $5.38, up more than $3.67 from Monday’s closing price of $1.71.
As you might expect on such a dramatic price move, volume for the Australia-based nanocap exploded from its three-month average volume of just over 20,000 shares to nearly 19 million shares on Tuesday.
The company had announced confirmation that its lead product, TRXE-009, originally developed for the treatment of brain cancers, has also been highly active against melanoma in pre-clinical studies.
The company believes this breakthrough discovery is important for two reasons:
- The discovery confirms that TRXE-009 is a potential treatment for melanoma, including secondary brain cancers due to melanoma, for which there currently are no effective therapies.
- Also, the discovery proffers evidence for the first time of a long-hypothesized link between brain cancer and melanoma.
The link between brain cancer and melanoma was considered a possibility because nerve cells and melanocytes (the melanin-producing cells located in the bottom layer of the epidermis that lead to melanoma) have a common origin in the embryo, which gives rise to neural cells that ultimately form the brain, spinal cord, and peripheral nerves in the body.
Until now, no functional link between the nerve cells and melanocytes has been found.
But for the first time, TRXE-009 has demonstrated the possibility of a link, suggesting that TRXE-009 could identify cancers arising in cells that have the neural crest as their origin.
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If the link is positively identified, the discovery could be a game changer for the more than 232,000 new melanoma patients each year fighting the deadliest form of skin cancer, as well as the small Australian research company at the head of the discovery.
This deadly form of cancer is particularly endemic to fair-skinned populations, with the highest incidences of the disease in New Zealand and Australia.
Make no mistake, investors jumping into shares of Novogen Limited are assuming some rather large risks.
The company’s financial results for FY 2014, which ended June 30, 2014, are less than impressive.
Total revenue for the company in 2014 declined by 92.2% to $86,868, while losses from ordinary activities in FY 2014 increased by 624.4% over FY 2013.
Net tangible assets for the company saw a significant decrease, as well, falling from $1.09 per share to negative $0.33 per share over the same period, although the company indicates just over $2.5 million in cash on hand for continuing operations.
Clearly, Novogen Limited is not a suitable investment for traditional investors.
But for investors willing to take a chance on a nanocap that could potentially revolutionize the treatment of melanoma and brain cancers due to melanoma, Novogen Limited could lead to huge gains in the future.
Just remember the often-quoted and rarely used axiom… huge potential rewards come with huge potential risks!