TLDR: NASH will be back with a vengeance and we will get our first dose of information this week.
Summary:THTX was wanting to raise money off of the back of blockbuster P1 TH1902 data to go it alone in both Oncology and NASH. Following the disappointing pause, the company will partner in NASH to de-risk the program and demonstrate its legitimacy. The partnership will bouy the share price and alleviate funding concerns through 1) cash from warrants exercised, 2) future milestone payments related to NASH, 3) renewed access to capital markets on more favorable terms.
Oncology: It is disappointing to say the least, but I think we can all agree that TH1902 and any further oncology developments are at least a year away and will not be the value driver in the short term. Last week's announcement that the revised P1 plan would get put to the SAC in late March just confirmed what I feared, Oncology will be a slow burn. It isn't dead and still holds a lot of promise, but they will take the time to get it right this time vs. shooting from the hip and hoping they hit something. In Paul's January letter to shareholders, he guided for positive EBITDA by the end of the year. Many took this to be significant staffing cuts while still pushing the program forward. I think this was the first tip of the hand to say that "R&D spend for the year is cut because we won't be doing expensive human trials this year". I think there will be revisions after the SAC and further vollies of information and questions with the FDA before beginning enrollment just before the end of 2023.
NASH Delays: The story is well known, messy HIV only P2 gave way to hopes of a broad P3, only to be punted back to a P2/3 that was to larged for a small company that was already spread thin. I believe that because of this, it took some time to sell suitors on a potential partnership that was no fault of leadership. However, as the TH1902 story started to unfold, and there was the possibility to see an influx of capital that was not overly dilutive, the bacteriostatic water excuse became a scapegoat for delaying partnership talks while still keeping things warm and cordial. If there was the possibility to keep the whole enchilada and become the "largest biotech in Canada", THTX was going to go for it.
Current State: While the Th1902 P1 trial dragged on and questions mounted, there also was a resurgence in NASH interest. Deals were getting done and dollars were starting to flow into the space. This gave TH the opportunity to stoke those partnership fires and get a deal done. Timing also couldn't be better with new Egrifta research set to come out that illustrates ancillary benefits of the drug, it will be great PR for the deal team at the partner company as they now could have access to multiple indications.
Tea Leaves: Of course, the above paints a rosy optimistic picture, but why? Why would I make this case? Why would I give the leadership team the benefit of the doubt and think they could pull this off? It is because they took a risky gamble to build something HUGE and unfortunately it didn't pay off. But the thing is that an experienced leadership team also knows that they can't bank on a hail mary and get caught up in their own hype. They need to make back up plans and carve a path forward based on the new reality. If the writing was on the wall in the summer (or earlier) and they have been unable to pivot and successfully partner in the development of the company's strongest commercial asset, then they are totally inept and not fit to lead a company. It would be a huge blunder and leave a legacy of failure. So now lets look at the recent developments that might suggest they aren't complete idiots.
Analysts: Just before the trial Pause you had Cantor and Jones trading initiate reports with lofty price targets that did not include oncology. If oncology were the driving force and reason for starting coverage, then it would have been incorporated into the research. Instead, both remained committed to their targets following the pause and were enthusiastic for some other reason. Then there is also the case of Doug Loe over at Leede Jones Gable. Doug has been reporting on TH for years and was not a fan of the company over the last year. He was critical of the decision to pursue risky assets such as oncology and applied a heavy discount rate to the commercial assets as a result. But in his January 5th report following Paul's letter, he appeared to take a more optimistic tone, and highlighted Egrifta's future potential. Other than the move into deep value territory given the depressed share price, why the upbeat messaging? What was said in those back room chats?
Business Update: I believe last week's oncology announcement was a way to break the bad news and reshape the narrative. It does not make sense to PR that then wait two weeks to give a business update saying we will let you know more later in the spring. With the pending presentation at CROI, there is either some significant development in the research and/or a partnership deal that they will want to elaborate on in more detail on the 28th. This is also why TH isn't making a big deal of Christian speaking at the PDC conference tomorrow. Oncology is treading water and they are leaning into the short term value drivers.
Institutional Ownership: It hasn't been this concentrated in years and strong hands will guide a path to value. I doubt Soleus wants to wait for years for a liquidity opportunity. They invested with the oncology story knowing it was backstopped by a saleable commercial portfolio and NASH asset.
Social Media Posts: The the "let them eat cake" attitude of last week's social media post with Paul, Dawn, and Dale all out at a gala was telling. I have no issue with the fundraising cause and the private lives of the individuals involved, but when the share price is in the ground and it looks to the outside that you may be up against the ropes, you shouldn't be posting about sipping champagne and rubbing shoulders. Again, it either speaks to utter incompetence or they have some exciting news in the hopper.
For me the next few weeks are binary. Either they pull something off as described above or they show their true colours. Time will tell, but for me the clock is ticking.