ORIONS Money Stocks

[crookedneck]

Important VICL DD - Must Read! I bought 2000 shares this morning @ $3.71 and looking to add more along the way to get to 5000 shares. Despite the small pullback since my buy, I think VICL will be an excellent stock to accumulate and hold for some big returns this year.

I have been following William Patalon for over a year and this fellow has handed me the most winners than all the other stock analyst/guru's combined. I have a 82% winning average from his picks, so when he speaks I listen. Plus he just tipped me off to INO that I bought 10,000 shares of so far and up over 10% in gains already. So read and enjoy - Cheers!

William Patalon III, Executive Editor Money Morning
and Private Briefing

As we've told you many times, there's nothing better to find than a beaten-down stock that's experiencing massed insider buying. Insiders sell for many reasons … but they almost always buy for only one – because they see an upsurge ahead. And those folks don't go to all the trouble of buying big blocks – with all the disclosure requirements, tax issues and financing challenges involved – just to make a point or two on the stock. When insiders buy, they typically do so because they see big gains to come.

That was a basic premise of the 1998 Prentice Hall Press book "Contrarian Investing: How to Buy and Sell When Others Won't and Make Money Doing It," which I co-authored with noted New York State money manager Anthony M. Gallea.

And I've found it to be true time and time again through the years.

This "buying with the smart money" rule is the basis of my recommendation for the New Year.

In the April special report "The Biotech Buyout Binge" we recommended three oncology stocks. All three posted hefty gains, and the biggest winner was blood-cancer specialist Pharmacyclics Inc. (Nasdaq: PCYC), with a peak gain of 153%.

One of the other stocks, Vical Inc. (Nasdaq: VICL), soared as much as 40% following our recommendation. However, it subsequently sold off, and now the shares are essentially back where they started.

But we believe that a rebound is in the offing. A big one.

And the "smart money" seems to agree.

You see, since the start of this year Vical insiders - including CEO Vijay B. Samant - have snapped up 133,750 shares. The purchases were made soon after Vical announced that its Nasdaq listing had been upgraded to the Nasdaq Global Select Market. That's the highest listing of the three available and means the company is mature enough to adhere to a tougher set of financial requirements.

In addition to the insiders, James R. Singer – already a 10% beneficial owner – has added to his stake by spending $1.7 million to purchase an additional 464,300 shares at prices ranging from $3.51 to $3.99.

Those purchases were made in July, August and September, but weren't disclosed until Jan. 15, according to the Securities and Exchange Commission filing that we linked to above.

Insider selling is often inconclusive. But on a stock that's been beaten down from its highs, there's nothing that gets me more excited than insider buying. And Vical seems to have a hefty upside. The stock is currently trading at about $3.50. The consensus target is $6 a share, though the target prices go as high as $7. Those predictions would represent gains of 71% to 100% above where the stock was trading as I wrote this.

The San Diego-based Vical already has two products for sale – both for animals.

Here in the U.S. market it has approval for a vaccine that combats skin cancer in dogs. And just over the border in Canada, it has been approved to sell a vaccine that fights a virus in salmon (an especially virulent virus, I might add). Salmon, as you know, is a critical food source in that country, so this could be a relatively important product.

For humans, Vical says it will soon complete a Phase III clinical trial of Allovectin, a therapy designed to treat late-stage skin cancer that's spread to other parts of the body. And tech-guru Michael Robinson tells me the company is also in the early stages of a clinical trial for a flu vaccine.

The odds of a windfall profit from a biotech buyout are about as good as you're ever going to find. As we told you in our Jan. 9 Private Briefing report, we're expecting biotech and pharmaceutical dealmaking to soar this year - even more than it did in 2012.

And we're suddenly seeing quite a few research reports that make the same case.
There have been 676 takeovers of biotechnology and pharmaceutical companies in the past three years, and the average buyout premium has been 38%, Bloomberg News reports.

But that impact could be even bigger this year.

The five largest Big-Pharma players - including Bristol-Myers Squibb Co. (NYSE: BMY), Pfizer Inc. (NYSE: PFE) and Merck & Co. Inc. (NYSE: MRK) - were holding more than $70 billion in cash and cash equivalents at the close of the third quarter. Having spent the last couple of years streamlining operations and incorporating earlier buyouts, you're going to see these behemoths embark on unprecedented shopping sprees - and can expect to see deals as big as $20 billion.

"With sales declining for the first time in 2012, it is only a matter of time before shareholder returns follow suit - unless [Big Pharma] can find new sources of growth," accounting-and-consulting firm Ernst & Young said in a report released at the start of the New Year. "With few options for organic growth, Pharma needs transactions ... [and] the pool of potential suitors that could pay up to $20 billion has swelled."

It's the so-called "patent cliff" that's sparking the biggest fears. Right now, some of the biggest drugmakers have some of their most-lucrative blockbuster drugs coming "off patent" - meaning these companies face the loss of $170 billion in aggregate annual sales.

So whether it's via a buyout in the near-term or through drug development over the long haul, we believe that Vical is a stock that will make you money.

The company's insiders apparently feel the same way.

Recommendation: Buy Vical Inc. (Nasdaq: VICL)

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