I tried to include the changes in red as requested but I type this in another program and then copy it over to Stockhouse. Unfortunately, the red highlighting is lost when I copy it over. So, I am afraid that hoped for useful change is not going to come to fruition. Sorry! I may try doing it differently next week to make it work - we'll see.
Weekly Report Card - 9/4/21 Summary – THTX’s stock rose 1.4% last week despite THTX once again being almost completely inactive on the shareholder’s relations front, at least in a public way. This small gain came as it appeared some buyer was carefully picking up shares during a period when trading volume was light. We have also heard that THTX contacted another major shareholder and brought up the possibility of having an event for that firm’s clients sometime in the Fall. That is an encouraging sign since they likely would not be looking to schedule such an event unless they had something positive to talk about. That plus the stock’s small rise this week has the Grumpy Grader feeling a tiny bit better, but since the company did virtually nothing in a public forum this week to promote the stock to investors and because the stock price advance this week was small, I can’t see how I can give anything higher than a grade of “D” again. I know it is the end of summer and that many people are on vacation, but our expectations do not change simply because of where we are on the calendar.
Fortunately, the pace of investor engagement is due to increase now that Summer is effectively over. We may have another slow week ahead since the NASH KOL event is just a little over a week away and preparing for that will likely be THTX’s focus this week. However, there should be many more opportunities this Fall for THTX to be much more frequently in front of investors and telling THTX’s very intriguing story to them. We already know they are expected to participate in a Cantor conference in late September but there should be other opportunities as well. The NASH KOL event next week needs to not only be done well but also have the right audience to be effective. Hopefully, LSA can help deliver the right investors to this event but that is likely going to be a tall task given the low esteem Wall Street currently has for NASH stocks following the disappointing recent failures of several drugs aimed at NASH (those failures of other NASH drugs, however, actually increases the value of THTX’s NASH asset, but the market is not smart enough to sort that out at the moment). With NASH being so out of favor at the moment, THTX’s stock price likely will not rise as a result of the NASH KOL event. But my guess is it is THTX’s hope it will rise enough to where it would make sense to raise new money to fund the NASH phase III internally rather than via a partner. That is not likely, however, until after they report preliminary efficacy and safety results from the phase 1a cancer trial later in the fourth quarter (assuming those results are good). And the question needs to be asked about why shareholders should be willing to fund the NASH trial if potential partners are unwilling to do so. Now, we do not know if potential partners are unwilling to fund it but we are assuming the initial results on the search for a partner have not been particularly worthwhile since they are now having a NASH KOL event to spur investor interest in NASH and hopefully boost the share price. We are certainly happy they are highlighting to investors what they have in NASH but are uncertain that it will deliver the hoped for results in the share price given the current market aversion to NASH stocks. We believe the attention THTX will give to NASH will have a positive impact on the stock price, as almost any news seems to have a positive impact these days, but we just do not think it will be substantial unless it is accompanied by news that partnership discussions are going well or some other new piece of important NASH news is released from Dr. Grinspoon’s lab.
Once again, despite our general grumpiness in handing out these weekly grades, which will undoubtedly persist at least until the stock hits a price greater than the $11.25 it hit in late May 2018, we do still think we should give credit where credit is due. Some of the issues raised here (and elsewhere too) in the past have been addressed to varying degrees of success – here are several we could think of:
- THTX’s CEO recently publicly addressed the issue of the stock’s too low valuation (hopefully it is not the last time he does that – the KOL event is another opportunity to do so)
- A new board member with capital markets experience was added (but he unfortunately did not have US capital markets experience)
- The corporate presentation has been updated and is very well done
- Analysts expectations for the legacy drug sales have been brought much closer to reality
- There was a major upgrade to the company’s website
- Allowing non-analysts to ask questions at the quarterly conference calls was a major positive
- There has been at least some minimal insider buying of the stock (and no insider selling)
- There has been increasing institutional interest in the stock
- THTX scheduled the NASH KOL event for September 13th at Noon which should bring attention to the merits of this asset that the market has so far ignored. It is being done in conjunction with LSA, which hopefully will help provide an audience for the event which will have at least a slightly positive impact on the stock price if the event is put together as well as past events were.
While we remain very interested in NASH’s long term possibilities for THTX, cancer is our focus at the moment. Cancer is much “cleaner” than NASH and the pre-clinical work, as well as any hints we have been able to glean in the midst of the ongoing human phase 1a trial, have been mostly very positive. In the end, however, we need to see the results of that phase 1a trial before taking our hopes up a notch for THTX’s cancer program. But make no mistake, if those results are anything close to resembling what was seen in the pre-clinical work with mice, it is going to be a very big deal for THTX’s future and its share price. It would likely lead to a Breakthrough Therapy designation from the FDA for TH-1902 and a steady increase in investor interest in THTX in the months thereafter. THTX has said they will share their preliminary efficacy and safety results with investors sometime in the fourth quarter.
Stock Price: Last Week YTD 1 Year Since THTX Hit its Peak (5/25/18) THTX 1.4% 46.0% 42.6% -67.6%
S&P Biotech Index 1.5% -4.7% 26.3% 43.1%
The table above summarizes THTX’s better than index performance over the YTD and the last year. THTX’s stock price, is however, still almost 68% below the high of $11.25 it reached in late May, 2018 whereas the S&P Biotech index is up 43.1% during that same time period, highlighting the company’s inability to get investors interested in their cancer and NASH opportunities as they transitioned away from disappointing sales for Trogarzo. Given how significant the NASH and cancer opportunities are and in light of the new CEO, as well as money spent on investor relations consultants and a new Investor Relations officer, all within a backdrop of a big bull market where stocks with far less than what THTX has to offer investors are performing much better, THTX’s longer term stock price performance has been quite disappointing. But the very good performance so far in 2021 indicates a new, more positive trend has begun. We hope developments in their cancer and NASH programs will propel the stock significantly higher, supported by an improved effort to reach investors with their very intriguing story, particularly regarding THTX’s cancer drug, TH-1902, or more appropriately its Sort1+ technology platform, of which TH-1902 is the first part. The biggest immediate risk to THTX’s share price is a sell-off from bubble highs in the market overall, which would likely drag THTX down with it. The biggest short term risk is that the cancer trial would end up with inconclusive or outright bad results.
Trading Volume: Last week THTX traded close to 392,000 shares, a sharp drop from the 619,000 shares traded during the previous week. This low volume reflects the absence of public activity by THTX to stimulate interest in the stock during the week and the fact that many investors are on vacation at this time of year.
A year ago 398,000 THTX shares traded during this week, roughly the same as last week and both weeks reflect the low volume often associated with this week of the year due to many investors being on vacation. Two years ago during the same week, THTX traded only a paltry 178,000 shares (it had not yet listed on NASDAQ so most of the trading was on the Toronto Stock Exchange at that time). If the company hopes to continue to improve on the trading volume in its stock, it will need to pick up the pace of effective engagements with investors and this Fall should give them ample opportunity to do that via both numerous conferences and, most importantly, the release of the phase 1a cancer data which hold the potential to completely alter the trajectory of THTX’s future prospects. We hope to see increased buying interest in the stock as a result of the NASH KOL event on 9/13 as well, but are keeping those expectations muted since NASH is out of favor at the moment.
Presentations to Investors: There were again no public presentations by THTX last week.
THTX’s CEO has shown he can do a very good job in investor presentations and the Chief Medical Officer has also demonstrated similarly good presentation skills. I don’t imagine we will hear from their medical advisor, Dr. Beliveau too often, but he also did an excellent job on his part of the June cancer webinar. The more such presentations they are able to do in front of varied audiences, the better. THTX has a great story and has the people who can communicate that story well. They now just need the right audiences to present to, something LSA is trying to help them with. Additionally, with the new website, anyone can now easily access any past THTX presentation anytime they want, which is very helpful for new investors considering investing in THTX. But they need to be out pressing the flesh with investors more often and with a narrative that they have created remarkable shareholder value while expending minimal shareholder resources in NASH and cancer in order to generate sustained interest in the stock prior to the release of the all-important cancer data in the fourth quarter.
THTX has proven they can present their intriguing case to investors well. Success will ultimately be found when they find a way to get the right audience to hear what they have to say.
Analyst Reports/Comments: There were again no new analysts’ reports written on THTX last week. The four analysts who cover the stock (I would argue only 3 of those 4 really cover it) are just not going to help the stock much at this point. THTX desperately needs better analyst coverage but it is not likely to occur until their cancer results are released and hopefully generate a lot of excitement.
With the company highlighting cancer on 6/21 and choosing to lead their pitches to investors with cancer, it is worth noting they do not yet have an analyst specializing in cancer stocks covering THTX’s stock. As noted, Canaccord’s analyst is a NASH expert. The remaining analysts really do not specialize in any particular type of drug company. THTX needs US-based cancer specialist analysts to pick up coverage of the stock if they expect to get full value from the market for their cancer program. Such analysts are the ones who have the best ability to convince institutional investors to buy THTX’s stock due to its prospects in cancer. Unfortunately, THTX’s small market cap of just $346 million is a big impediment to most institutions buying the shares at this point anyway, which means they likely should have a bigger focus on retail investors in their investor relations efforts until the market cap has grown to a level more in line with institutional interest. Additionally, THTX’s sub-$5 stock price is another major impediment to attracting institutional interest in the stock. THTX’s credibility with institutional analysts and portfolio managers is low due to the company overestimating the markets for both Egrifta and Trogarzo when those drugs were launched and due to the very unfortunate decision to go ahead with a share offering in January at a low price and primarily backed by lower quality, Canadian brokers.
Cantor’s analyst may produce a new report on THTX at some point but there may be securities regulations that limit Cantor’s ability to research the company actively while in the midst of a share offering they are leading. While THTX apparently has no interest in selling shares through the ATM at this time or price, technically, there is an open share offering that Cantor is leading and we have not been able to get to the bottom of whether that restricts Cantor from writing up a report on THTX. Nevertheless, they can speak to their clients about the stock and encourage them to buy it. From Cantor’s perspective, they are incentivized to push THTX’s share price higher as that increases the odds THTX will issue shares thru the ATM thereby earning Cantor some healthy fees. In the end, however, I do not view the Cantor analyst as one who will likely create a lot of institutional interest in the stock given that analyst’s apparent focus on generating fees for her firms based on getting deals versus by generating research that gains the respect of institutional investors. So the analyst situation with THTX, which has been a long-standing problem for the company, remains bad. We suspect only good cancer results will lead to an improvement in this situation as the current finance team has never been able to achieve lasting and worthwhile analyst coverage for the stock.
Appropriate Analyst Expectations: There is no change from last week in this section. We will take a closer look at this as THTX’s Q3 financial results draw nearer.
Following the Q2 results, the NBF and Leede analysts did reduce their revenue forecasts from the too high levels they had previously maintained. The Mackie analyst seems to still have the most realistic revenue forecast from our perspective and the NBF and Leede analysts are likely still too high, particularly with regard to fiscal 2022 revenue estimates. Now, with the Canaccord analyst finally taking a hatchet to his way, way too-high sales forecasts, the analysts as a group are much more closely aligned with reality. But I still think they could easily have to reduce their forecasts again once the Q3 numbers are released. Ideally, a company wants the analysts to always be too low in their expectations for quarterly sales and earnings so they are always increasing their estimates each quarter rather than lowering them. THTX could use quarterly revenue guidance to bring the analysts to forecasted sales levels they think they can beat each quarter but for reasons that remain a mystery, THTX is just not willing to do what almost all other companies do in order to manage their analyst’s expectations so that each quarter results in a headline proclaiming that THTX did better than the analysts’ expectations. It is not easy to understand why giving quarterly revenue guidance is a difficult thing for THTX to do as the revenue stream from the two legacy drugs does not seem so uncertain as to not be able to make a conservative, beatable forecast for the next quarter.
Corporate Presentation: The most recent update to the Corporate Presentation took place on 7/20/21.
THTX’s corporate presentation is now a very good one. The corporate presentation is now so much better than it was a couple of years ago and THTX deserves a lot of credit for getting it dramatically improved. That improvement is also the result in how the company’s fundamental situation has improved over that time in both NASH and cancer – they now have more to talk about. They can easily go into a meeting with US medically-trained analysts and gain their respect with the high quality of their current corporate presentation.
Press Releases: There were no press releases this week. THTX did send out an e-mail to investors reminding them of the upcoming NASK KOL event on 9/13 and LSA did as well.
Increasingly, stocks trade based on computer algorithms that read press releases and react to them by placing trades depending upon whether the algorithm thinks the news is good or bad. If THTX issues no press releases, trading volume goes down as it did this week.
LSA Activity: As noted above, LSA sent an e-mail this week to remind investors about the upcoming NASH KOL event, so it looks like this relationship has been kicked into gear again, at least from a public perspective. It will be important that LSA, and perhaps Cantor, get the right investors to attend this NASH KOL event if the THTX share price is going to take any notice of what THTX has in NASH.
The big question is whether LSA has the capability to consistently provide a whole new audience to hear THTX’s very intriguing cancer story and if that can drive investor interest in the stock. We suspect LSA does have such a capability and we saw indications of that at the cancer webinar. We have been told that LSA is a bit capacity constrained and does not accept all companies which would like LSA to represent them. If that is correct, it is a good sign that they were willing to take THTX on as a client. I would have hoped to have seen more of an obvious positive impact from LSA’s involvement by now but perhaps the increase in institutional investment seen in the second quarter is partly the result of LSA’s efforts. The NASH KOL event on 9/13 being sponsored by LSA is really important for THTX so it will be interesting to see the reaction to that as we attempt to measure the positive impact of LSA on THTX’s stock price.
Retail Investor Engagement: Once again, there was no new evidence of retail investor engagement in the last week. What follows is a repeat from past weeks.
Apparently, LSA’s job includes attracting high net worth, retail investors to THTX. Some participants on the cancer webinar apparently included people who work with such investors. But it is not evident that THTX has a sensible strategy in place to pursue retail investors or even desires to do so. With retail investors becoming a prime mover in so many stocks, particularly smaller ones like THTX, we are not sure why THTX seems to be largely ignoring this segment of investors. A crude measure of retail investor engagement with THTX is the number of “followers;” the stock has on Stocktwits. At the moment, THTX has only 906 followers on Stocktwits, which is a pitifully small number. Many other companies with far lesser prospects than THTX’s have many thousands of investors following them on Stocktwits. For example, GALT, a company with less impressive cancer and NASH prospects than THTX, and with no approved drugs at all, has over 9,000 followers on Stocktwits – 10x the amount THTX has! THTX clearly has some work to do on this front but they have shown very little interest in doing it so far.
Website Improvements: While the Investor tab has returned on the English version of the website, it is still gone on the French version. I am not sure what is going on with the disappearing Investor tabs but it does not inspire confidence that THTX has a handle on their website and can fix seemingly small issues quickly.
Despite this odd glitch, the recent website improvements have been very good and we hope the new and improved site will be well maintained and improved even further. The ability to find recent conference presentations and listen to them again is extremely helpful. We should also note the improvement to the quarterly meeting whereby investors other than the analysts covering the stock can now ask questions of management.
Insider Trading Activity: There was no new insider trading this week.
As noted previously, two insiders purchased small amounts of stock recently. New board member Joseph Arena purchased several thousand shares which likely reflects the amount his board membership requires him to purchase. New head of Global Marketing John Leasure, however, purchased 5,000 shares and he has no such requirement. These are relatively small insider purchases but some are clearly better than none. It is also worth noting that Leasure was also granted options that will allow him to buy more than 21,000 additional shares. So, he bought shares with his own money in addition to being granted those shares by the company, a good sign.
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: There is no update to this section this week as there were no new filings indicating any changes in share ownership by institutions or others.
All of the quarterly institutional filings are now in and there actually was some considerable buying in THTX by Morgan Stanley where they added over 1 million shares to their holdings during the second quarter. Soleus, the largest shareholder in THTX also added a small amount to the large stake in the second quarter (although we are wondering if they have been the seller recently). Virtually all new institutional transactions in THTX’s shares were on the buy side in the second quarter, which is clearly what we want to see and indicates that perhaps LSA and the company’s efforts are having at least a small impact in raising the profile of THTX. However, one of the firms we believe participated in the share offering in January, Arrowstreet Capital, sold its entire 335,000 share position during the second quarter. Renaissance also sold 150,000 shares during the second quarter and continues to hold 185,000 shares. Renaissance is generally known as a high frequency trading firm so we would expect its holdings to fluctuate a lot.
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: As noted a few weeks ago week, in a major change, the CEO took the opportunity of the Canaccord Growth Stock conference to highlight the absurd undervaluation of THTX’s shares. Hopefully, this will become a constant feature in his presentations as it is true and it will be very helpful for potential investors to hear him make that claim. If he is not confident THTX is a great buy, why should any potential investors be confident about that? Now, if insiders would back up these claims with meaningful insider buying, investors would be sure to take notice and be attracted to the stock. Hopefully, some mention of the seeming absence of any value given to THTX‘s stock by investors for their NASH asset will be raised at the NASH KOL event
Again, suggestions for improving this are welcome.