Great assessment. This company is blessed to have many sophisticated investors....
SPCEO1 wrote: Weekly Report Card - 06/12/21
Summary: THTX did literally nothing this week, at least that the public was aware of, to support its share price. As a result, it gets another failing grade for this week’s efforts – “F”. We have to think that this is the calm before the IR storm that will soon start as they look to set a new tone around the company’s share price via their interaction with LSA and other measures they may take. Since they did nothing last week, however, there is really not much new info below, so feel free to skip it. I did add a section where we will monitor progress on improving their website, but there has been no progress on the website upgrade so we are still hoping for something bigger and better on that front too. Hopefully, that will be part of a bigger process, soon to be revealed, to help rebrand THTX with investors.
There may be more news next week if the company seeks to build anticipation for the 6/21 cancer-focused event, but we cannot be sure what their plans are. They may lead with the 6/21 event and then follow with other information later. Or they may announce some new cancer related info next week prior to the 6/21 event to help create interest in and attendance at the 6/21 webinar. Additionally, LSA might issue a report next week in order to help stir up interest in and institutional attendance at the 6/21 cancer webinar. One thing we know, they cannot have any less investor engagement than they had last week in the week to come! Obviously, the focus remains on what the company may say on 6/21 about cancer and how any news they share then may favorably impact the stock price.
Stock Price: THTX’s stock price fell by just 0.28% last week as there was no real news produced by THTX which might impact the share price. THTX is up 41.6% in 2021 and up 94.6% over the last year. For three weeks in a row, there has basically been nothing of note announced from the company that would help the share price. We believe the company needs to change its approach so that it has more frequent interactions with investors rather than having long periods of virtual silence.
Trading Volume: THTX traded roughly 314,000 shares last week, a slight improvement versus the 272,000 shares traded last week, but there were also 5 trading days this week versus only 4 trading days last week. So, the average daily trading volume fell from 68,000 shares last week to less than 63,000 this week. These are very low trading volume numbers and reflect the lack of investor engagement THTX has had in recent weeks. A year ago THTX traded just short of 600,000 shares. Two years ago during the same week, THTX traded only 124,000 shares, an incredibly small amount, so trading volume has actually been even worse not all that long ago. Still, the trading volume has really dried up recently from much higher levels earlier in the year and this at least partly reflects the lack of investor engagement THTX has had recently. With the probability of favorable news coming out on cancer on 6/21, the demand for the shares may improve soon, but the recent trends have been absurdly bad for a company that has invested much more money in investor relations in the last two years while simultaneously making very meaningful progress on both cancer and NASH, but has only seen key metrics like trading volume regress rather than progress.
Presentations to Investors: THTX again 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. My guess is they are gearing up for the 6/21 cancer event and looking at that as a key turning point in their investor relations strategy. So, we might not see any presentations to investors between now and 6/21.
Analyst Reports/Comments: Since there was again no meaningful 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. As they move closer to needing more money to pursue their cancer and NASH trials, they may be able to entice some analysts looking to get a piece of any future share offering they might do to pick up coverage of the stock, but that is not likely to be an incentive anytime soon since they have enough cash at the moment. Additionally, they may end up getting additional cash via partnerships, further postponing, and depending on the exact nature of any partnership, or eliminating the need to raise more money.
With the company highlighting cancer on 6/21 and apparently choosing to lead their pitches to investors with cancer, it is worth noting that they do not have a analyst specializing in cancer stocks covering them yet. Canaccord’s analyst is a NASH expert. The remaining analysts really do not specialize in any particular type of drug company. THTX needs cancer specialist analysts to pick up coverage of the stock if they expect to get full value from the market for their cancer program.
Appropriate Analyst Expectations: The following is just a repeat from last week as nothing has changed on this front that we are aware of.
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 again no update to the corporate presentation in the last week. The most recent update occurred on April 16th. At a minimum, I would anticipate a separate cancer-focused presentation to be put together for the LSA KOL event on 6/21, but they may also update the standard corporate presentation at that time as well.
Press Releases: There was one press release this week, but it was simply a re-announcement of the 6/21 KOL webinar being put on in conjunction with LSA. So, effectively, they told us nothing new this week.
LSA Activity: There was no new LSA activity this past week. Other than the press release highlighting the 6/21 event focused on THTX’s cancer program, the company did not engage in any public effort to build some excitement and/or anticipation for this event.
The big news the previous week was an e-mail the company sent to selected investors with the announcement of a planned KOL webinar with the doctor who discovered TH’s cancer drug, Dr. Beliveau, sponsored by LSA. It turns out that we later discovered we had received this announcement directly from LSA as well but had not picked up on it among the many e-mails we get from LSA on a daily basis. The announcement indicated THTX management would also update investors on the status of the cancer phase I trial. The big question is whether LSA has the capability to 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 but the proof will be in the pudding. If so, it could prove to be a watershed moment for the stock where it will begin to move from being relatively unknown by most investors and start the process of becoming much better known as a company with some rather startling cancer prospects. It will also help if THTX takes other measures to build interest the event ahead of time in order to maximize the leverage of this presentation for the stock price. Perhaps there will be new research findings shared at the event by Dr. Beliveau that will hint on what might come after TH-1902. It will also be interesting to see if LSA puts out a research report on THTX prior to or after the event. We have heard Dr. Beliveau speak before and he did a very good job on that occasion, so we are hopeful this could turn out to be an important event for THTX and push the share price higher as more investors begin to understand what we already know about the truly significant upside appreciation potential for the stock if the cancer phase I trial produces worthwhile results.
Retail Investor Engagement: There was nothing on this front this week and it is still not clear yet that THTX even intends to pursue retail investors much. In today’s market, there is abundant evidence of the importance of retail investors in moving share prices, so it does not seem sensible to ignore this segment of investors, especially when THTX has an investment narrative that should play well with retail investors.
New Board Member: I don't really expect them to have this sorted out yet but it is something we are monitoring.
Website Improvements: We are adding this metric to keep an eye on and should have had it included all along. THTX’s website needs an upgrade to be among the best we have seen in the small cap biotech arena. There have been previous claims from the company that such an update was imminent, but it has yet to happen. We suspect any improvements may have been delayed by a desire to coordinate an IR overhaul with the consultants at LSA.
Insider Trading Activity: There was no insider trading in THTX this week.
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 were no reported changes in institutional holdings last week.
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. Nor have they shown any proclivity to do so in the past. 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. Unfortunately, with NGM basically leaving the NASH arena and with the resulting sell-off in almost all NASH stocks, the valuation gap is now a bit less impressive, but it is still there and is still quite significant.
Additionally, THTX’s management has clearly chosen to focus on its cancer program in order to attract investors in the short term, which makes sense due to its huge upside, the novel approach THTX has with its cancer drug, its Fast Track status with the FDA and the fact that NASH is temporarily out of favor among investors. With two R&D programs in huge potential markets, it actually complicates THTX investor relations effort a bit as separate groups of analysts focus on NASH and cancer. Clearly, THTX has chosen to focus on cancer in the short term so we are not sure now how they plan to handle the NASH phase III protocol announcement at this point.
Weekly Grade - F - It was yet another very quiet week from THTX which led to a lack of trading and movement in the share price. As a result, the only grade that can be given is an “F”. 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 again this week but the news with the cancer presentation on 6/21 we are just a little over a week away from what could prove to be a big positive turn in the metrics we monitor here. My sincere 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 as well as the cancer webinar on 6/21, and that this accounts for the silence during the past week.
Again, suggestions for improving this are welcome.