Weekly Report CardWeekly Report Card - 07/10/21
Summary: THTX stayed in the investor communications hole they climbed into last week and produced no public engagement with investors. The stock price fell slightly as a result of the lack of activity and despite the various stock averages all hitting new highs. Trading volume did recover notably, however, perhaps indicating some interested buyers showing up in a delayed response to the cancer webinar, as we have thought might happen. Still, with the company doing nothing, at least publically, to support the stock price last week, they once again unfortunately get an “F” for their efforts to support the stock price. So recently, the company launched a much improved website, hired a new board member with capital markets experience and held the LSA cancer focused webinar. But they have done nothing, at least that we are able to see, over the last two weeks to build off of those positive developments. Other than the cancer webinar, they have not presented at any conferences or other venues where they could discuss the company more generally in quite some time. This recent lack of engagement may be related to internal preparation to reposition the company in investor’s minds in some notable fashion but it may just be a lack of effort too. In the upcoming week we will, at a minimum, have the quarterly financial results conference call during which significant new information is often shared with investors. Given where the cancer trial appears to be at the moment, we are hoping meaningful information will be shared about it and we will be able to give a much better weekly grade next Saturday.
Stock Price: THTX’s stock price fell slightly last week, dropping 1.8%. THTX is now up 52.8% in 2021 and up 68.3% over the last year. THTX’s stock price, is however, still about 66% below the high of $11.25 it reached in late May, 2018 highlighting the company’s inability to get investors interested in their cancer and NASH opportunities as they transitioned away from disappointed sales expectations for Trogarzo. Given how significant these 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 and 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 with THTX’s cancer drug, TH-1902.
Trading Volume: In just 4 days during this holiday shortened week, THTX traded 472,000 shares, a notable jump higher from the 358,000 shares traded during a full week last week. On a daily average basis the number of shares rose sharply from around 72,000 per day last week to 118,000 this week. So, perhaps we may now be seeing greater buying interest from someone who participated in the cancer webinar, spent some time doing more research and is now looking to build a position in the stock. The way the trading took place this week was also interesting as whoever was buying seemed to patiently accumulate shares during most of the day as others sold more aggressively but then accelerated their buying towards the end of the day, thereby pushing the stock up fairly rapidly.
A year ago THTX traded 421,000 shares, so some improvement has been seen from that level. Two years ago during the same week, THTX traded only a measly 54,000 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 improve on the trading volume in its stock, it will need to continue to engage with investors far more frequently and effectively in the future than it has in the past.
Presentations to Investors: THTX made no public presentations to investors last week so there are no changes to this section from 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 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 the any 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 in order to generate sustained interest in the stock.
Analyst Reports/Comments: The two analysts who did not write up anything regarding the cancer webinar never circled back to do that. So, there were no new analyst reports this week. This will change next week after the company reports its second quarter financial results on Thursday.
Of the four analysts covering the stock 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. 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 THTX moves 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 to pick up coverage of the stock, but that is not likely to be an incentive 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 via share offerings.
Also, we have discovered that LSA does not apparently directly offer a paid for research option but functions much like other investment banks in this regard. So, LSA may only write a research report on THTX if it sees a way in which it can earn investment banking fees from THTX. They likely do see such a possibility in the future, so we may eventually get a LSA research report on THTX, but since THTX is not likely to do a deal in the near future, LSA may not be in a big rush to produce a research report in the near term.
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 have an 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 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 $360 million is a big impediment to most institutions buying the shares at this point, which means they should have a bigger focus on retail investors in the their investor relations efforts.
Appropriate Analyst Expectations: The following is just a repeat from previous week as nothing has changed on this front that we are aware of. We hope the analysts whose sales expectations need to be reworked will do so either just prior to or just after the company reports its second quarter earnings next Thursday.
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 (on 7/15) 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. A separate cancer-specific presentation was produced for the cancer webinar but the general corporate presentation was not updated. Hopefully, we will see an updated corporate presentation soon which incorporates some of the material shared on the cancer webinar as three months is a very long time to go without an update in the corporate presentation. Typically, THTX only updates its presentation when it is about to do a presentation to a conference or group of investors. Since the presentation has not been updated in three months, we can reasonably surmise the company has not been making presentations to investors about THTX during that time frame (with the exception of the very well done cancer webinar on 6/21).
Press Releases: THTX put out no press release this week. We know we will get at least one important press release this upcoming week when THTX reports its earnings.
LSA Activity: Following the very well done cancer webinar sponsored by LSA, there was again no obvious LSA activity this past week. It is now almost three weeks after the cancer webinar. Likely there has been follow-up going on behind the scenes, but there were no new LSA public events.
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. If LSA is good at what they do, Monday’s webinar could prove to be a watershed moment for THTX’s 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. The pick-up in trading volume this past week may be an indication that LSA has been able to attract at least a little more interest to THTX, but for the LSA relationship to be viewed as a success, they will need to build off that modest start considerably.
We have discovered LSA writes research reports at least somewhat independently of their investor relations consultancy activities and that THTX would not actually be able to pay LSA to produce a research report on them. Now, in its research report disclosures for other stocks LSA analysts have written reports on, it indicates it may seek, or already had received, investment banking fees from these companies. So, it is possible LSA will choose to write a research report on THTX in the future if it sees a way to earn fees from any financing or other investment banking deal THTX might do in the future.
Retail Investor Engagement: 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 912 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.
Website Improvements: THTX posted a new job for a communications person who would have as part of their job function the updating of the corporate website. In the past, such updates were few and far between, so hopefully they will find some new person who will improve the timeliness of their website.
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: THTX made no public effort in the past week to address the discount in its stock price to other similar companies.
From our perspective, the easiest way for THTX’s stock price to appreciate significantly in the short term is for the 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 and currently, they are not doing that. 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. Hopefully, THTX can overcome what we believe is an irrational belief that they should not mention anything about the valuation of their shares versus other companies in similar lines of business. They are happy to note different clinical results of similar companies in their presentations but thus far have been unwilling to highlight to investors the rather absurd undervaluation of THTX’s shares versus those same companies. They could also easily highlight similar valuation discrepancies with other early stage cancer stocks.
Additionally, THTX’s management has clearly chosen to focus on its cancer program first in order to attract investors in the short term, which makes sense due to its huge upside potential, the fact that there will be quite a lot of data coming out in the short term on cancer, 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. But these are high class problems to be facing.
Weekly Grade - F – There were no obvious efforts coming from THTX to engage with investors in the past week. We would like to give THTX a better grade but cannot until it is deserved.
Again, suggestions for improving this are welcome.