Post by
SPCEO1 on May 29, 2021 9:34am
THTX Weekly Report Card
Weekly Report Card - 05/29/21
I have added section on Appropriate Analyst Expectations, Insider Trading Activity and the Corporate Presentation this week. Suggestions for other areas to monitor are always welcome.
Summary: It was a bad week for THTX on the capital markets front, mostly because the company had no public engagement with investors and there was no progress on any of the other categories we are monitoring either. Accordingly, we gave them a grade of “F” this week. Also, this week marks the three year anniversary from when the stock hit its high price of $11.25 shortly after Trogarzo hit the market in 2018. While THTX’s leadership has managed to pivot pretty quickly from the failure of Trogarzo to live up to sales expectations by finding two new gigantic opportunities in NASH and cancer, THTX’s stock price has been very slow to incorporate these new prospects. We believe that is about to change as the NASH protocol gets rolled out soon and the cancer phase I results will start to be released shortly thereafter. It has been a long wait for THTX to get itself sorted out but we should know if their efforts in NASH and cancer will grab the attention of investors again by this Fall, if not sooner. And if they are successful at getting the broader investment community re-engaged with the stock due to a fair valuation for its NASH prospects or a recognition that their cancer drug could turn out to be very impressive, or both, then the stock could easily surpass the high it hit three years ago. This weekly report card is meant to monitor their progress on key elements of their efforts to win over investors to the view that THTX’s stock is a bargain and the company’s prospects are worth investing in. In our view, the NASH phase III trial is virtually a done deal and it is now just a matter of the stock fairly reflecting what THTX already has in this area, just as other late stage NASH stock already do. We think that alone could push the stock back to somewhere around its previous high. Cancer is much more speculative at this early stage of development but also has much more upside in it for the stock. While we are not giving the stock any value for cancer yet, it is not hard to figure out that favorable cancer trial results will really propel THTX’s stock price much higher. With NASH alone justifying holding the stock, it makes sense to hang around and see what happens with cancer.
Stock Price: THTX’s stock price fell by 6.4% last week, thereby giving back almost all of the strong gain it achieved last week. It is still, however, 40.8% higher so far this year and is up more than 95% over the last year.
Trading Volume: THTX traded 422,524 shares last week, slightly less than the 430,000 shares traded last week. But more than half of the week’s trading happened on just one day, Friday, when 284,000 shares traded hands. The other days of the week saw incredibly low volume, as low as just over 20,000 shares on Wednesday, which is hard to believe. A year ago THTX traded 565,000 shares during the same week, but like last week, nearly half of that trading took place on Friday before the long holiday weekend. Two years ago during the same week, THTX traded 623,000 shares. It is hard to see how it is even possible that the trading volume in THTX has recently declined so much (it was much higher earlier in 2021) and how it could be lower now than in each of the last two years, especially given there are now many more shares outstanding. It is pretty clear that investors are not paying as much attention to the stock now as they were one or two years ago or even earlier this year, despite the fact that THTX is in the midst of a potentially transformative phase I cancer trial and on the cusp of beginning a phase III NASH trial, neither of which was true last year or the year before. Despite good fundamental news on these two key R&D programs, a still roaring bull market and the addition of a new CEO, IR officer and IR consultants, the situation with THTX’s trading volume has somehow gone backwards, at least in recent weeks. I doubt it will last long but it sure is odd.
Presentations to Investors: THTX made no public presentations to investors last week that we are aware of. No doubt the head of IR and the CFO and/or CEO spoke to some investors during the week in private calls, but there was nothing in a public venue. Public presentations are largely a function of opportunity – if there are no conferences or other venues to participate in then it is not easy for THTX to get in front of a crowd of investors. Moreover, since THTX is not seen as a stock that is an investor favorite, conference sponsors are not falling over themselves to get THTX involved in their conference. Clearly, THTX needs to produce results on cancer and NASH which will make it attractive to investors and conference organizers. We suspect this will be happening before too much longer and THTX could easily become a favorite of investors if their cancer phase I trial produces very good results. Still, the chances of that occurring are still low as they are trailblazing with their approach to cancer and the potential for things to go wrong in this early stage trial are high (the chances for things to go wrong in any early stage drug trial are high). But if it goes well, it will likely be a very big deal for THTX and its shareholders.
Analyst Reports/Comments: Since there was no news regarding THTX this week, there were no analyst reports or comments published that we are aware of. There are still just four analysts covering the stock and only the Canaccord analyst is a US based analyst. THTX desperately needs new and better US analyst coverage but it is going to be hard to come by in our estimation any time soon (other than the expected report coming from LSA, the company’s paid for IR consultant). As THTX moves into its phase III NASH trial and especially if its cancer trial is a success, US NASH and cancer-focused analysts may become more inclined to cover it.
Appropriate Analyst Expectations: The Canaccord analyst, who is actually the most accomplished of the analysts covering the stock and an expert in NASH, has sales quarterly sales forecasts for THTX in 2021 that are absurdly high. So, somehow, THTX’s best analyst has the worst 2021 revenue forecasts! He is expecting a $10 million increase in quarterly revenues in Q2 over Q1 (66%!), which is simply not going to happen. He expects Q3 revenues to be twice that of Q1 and Q4 to be nearly 3X that of Q1. None of this is remotely possible. I am not sure how he ever came up with these numbers but he will need to bring them way down as we have no reason to believe these numbers have even any chance of being attained. The only reason I can see for having such wildly high forecasts was to help sell the share offering in January. These ridiculously high forecasts will lead to headlines at the next quarterly earnings report (early July) that will indicate THTX missed analysts’ forecasts on sales, when in reality it was the analyst who “missed” not the company. THTX needs to get this analyst to revise his numbers lower as soon as they can. The best way of doing that is to announce revenue guidance as the analysts always fall in line with such guidance. Perhaps they will do that when/if they start the process of rebranding the stock with the help of LSA.
The Mackie analyst has much more sensible and achievable 2021 revenue numbers. The NBF analyst did not provide any revenue forecasts in the most recent report so we can’t even tell what he is thinking. The Leede analyst did not provide any quarterly projections in his most recent report but his annual sales forecast indicates he is still a bit too optimistic and needs to bring his numbers down, but he is nowhere near as off the mark as the Canaccord analyst.
Corporate Presentation: There was no update to the corporate presentation in the last week. The most recent update occurred on April 16th. There have been great improvements in the corporate presentation over the last year and they finally started talking about their most interesting opportunities in the presentation first and put the legacy drugs in the back. Now THTX just needs to get in front of people with this pretty good presentation. Naturally, it will be even better once the NASH protocol is finalized. And they can improve it by including a slide that highlights how undervalued their NASH program is versus other NASH stocks.
Press Releases: There were no press releases this week. A steady flow of press releases, even ones of little consequence, has seemingly become essential to maintaining interest in a stock for many investors in the current market.
LSA Activity: Still nothing from LSA yet. I have to believe there is a lot of activity going on behind the scenes but nothing yet has been visible to investors. I am not sure how long LSA has been on the job but I suspect they have been involved for more than a couple of months already. I imagine they are looking to hit the ground running with the intent of leveraging the impact of a major announcement such as the NASH phase III finalized protocol.
Retail Investor Engagement: There was nothing on this front this week and it is not clear yet that THTX even intends to pursue retail investors much.
New Board Member: I don't really expect them to have this sorted out yet but it is something we are monitoring.
Insider Trading Activity: Insider trading in THTX usually comes in spurts as the insiders are prevented from buying or selling most of the time. When a window for insiders to trade occasionally opens, there has only infrequently been much trading. Almost all the trading has been on the buy side when it has happened in recent years. With the former CEO and former board Chairman Paul Pommier now retired, two of the largest insider holdings are no longer present. Overall, insider holdings of THTX are low reflecting the fact that THTX is not a young company so the original insiders have been diluted over the decades. Also insiders have the opportunity to pick up cheap shares via options, which is more attractive to them than buying them on the open market. Still, it would be nice to see more insider buying. Our new CEO should be credited for picking up a sizable number of shares during his still short stint with the company even though he is entitled to receive a very large number of shares via options.
Changes in Institutional Investors Shareholdings: Most weeks there will not be new information on this item as filing requirements cause notifications of most changes in institutional holdings to be announced six weeks after the end of each quarter. Occasionally there are some other changes filed during the quarter and we will remain on the lookout for those.
Efforts to Highlight the Relative Undervaluation of TH's Stock: With no public comments from THTX this week, they had no opportunity to point out the undervaluation of their NASH asset relative to other NASH stocks. From our perspective, the easiest way for THTX’s stock price to appreciate significantly in the short term is for this huge valuation gap with other NASH stocks to be greatly reduced or eliminated altogether. But it is less likely to happen if the company does not draw investor attention to the gap. We are hoping when they announce the NASH protocol they will also highlight the valuation gap.
Weekly Grade - F – It was an unusually quiet week from THTX which led to a lower share price and really low trading volume. Investors need to be given a regular flow of information to maintain interest in a stock in the current market environment. THTX failed to do that so they get a failing grade this week. My hope is they are busy preparing for a sizable investor relations effort in conjunction with LSA and the upcoming announcement of the final NASH protocol, and that this accounts for the silence during the past week.
Again, suggestions for improving this are welcome.