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Acrux Limited soars: Is there time to catch the flight?

Acrux Limited (ASX: ACR) jumped more than 12% in trade this morning to $1.29 as investors conclude sales problems facing the company’s key testosterone therapy product, Axiron, may be short-term in nature.

Sales slumped after the U.S Food and Drug Administration (FDA) announced in January that it was looking into health concerns around testosterone therapy treatments such as those produced by Acrux. Testosterone therapy has long been known to carry certain health risks and products sold already carry labelling outlining the risks. The FDA has also said its current view remains that the health benefits outweigh the known risks, although it is yet to announce the results of its latest investigation.

Acrux has also been heavily short sold by speculators and the buying today may be a result of those speculators closing positions that are out of the money. Short selling is a high stakes game that can result in liberal amounts of egg on the face if sentiment or company news turns against those speculating on a falling share price.

The announcement of the FDA investigation and sales drop may indeed prove to be a short-term storm that blows over, as testosterone therapy to improve male energy levels or sex drives is a growth area with strong tailwinds. Sex sells and memories can be short, in which case Acrux may return to a growth trajectory yet.

 

Acrux remains a risky play with potentially high rewards. But there may be three even better ones for those chasing big profits.

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Motley Fool contributor Tom Richardson owns shares in Acrux Limited. You can find him on Twitter @tommyr345

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