Several random thoughts about THTX: - Volume on THTX was very high early in the week and then lower on Thursday and Friday. Volume in Toronto was also very high on Wednesday. We believe this is relate to THTX management meeting with portfolio managers and analysts in Toronto and, via Cantor Fitzgerald, in the US. When THTX puts out a new corporate presentation, that often means they are planning on meeting with institutional investors. It seems like the Canadian investors responded and bought more shares but there was not a lot of evidence the US investors did the same as the Cantor meetings were on Thursday and volume was nowhere near as strong as after they likely met with Canadian investors on Tuesday and/or Wednesday (I am guessing they met with Canadian investors as they did not announce it but it fits with their past pattern). We could see more interest next week in THTX if the Cantor meetings went well and it would be very helpful for the stock if those meetings went well since that might also encourage the Cantor analyst, who is familiar with THTX, to pick up coverage of it. In the end, however, we should not expect too much movement from buyers until the cancer data is released in Q4. Some investors might want to own THTX before the cancer news is announced, but these days, it seems more institutions tend to wait until the news is out rather than anticipate it. Still, it is good for THTX to be out speaking with these investors and “priming the pump” for when the news is out. We want investors to be anticipating the news when it is released rather than being unfamiliar with what is going on at THTX if we are going to get the best possible positive reaction to good news on cancer, if it is forthcoming.
- The Canaccord analyst never wrote a report on THTX following last week’s conference call. You may recall this analyst is named Ed Nash and he specializes in NASH stocks. Given THTX is partnering on NASH and focusing on cancer, could THTX end up losing this analyst too? I would say there is a good chance that may happen. Hopefully, THTX will soon be swarmed with new US cancer specialists picking up coverage but probably will not happen until after THTX releases preliminary results safety and efficacy and it is possible that might not happen until the full phase I trial is over next summer. It is hard to say any of the analysts are offering much help to the stock price right now, so I am not sure losing Ed Nash would be a big low, but THTX really needs to start getting some US-based cancer specialist analysts to follow it as it has clearly chosen cancer as its main path forward.
- Another thing for us to consider is that “good news on cancer” can take many different forms. Too many to list here, actually. But some would include:
- Preliminary data that shows the drug to be both totally safe and effective in reducing tumors of all types
- Preliminary data that shows the drug to be totally safe and effective in reducing those tumors that overexpress sortilin receptors
- Preliminary data that shows the drug to be totally safe and that the concept that THTX has where the sortilin receptor internalizes the PDC TH-1902 proves to be true, but the tumors do not shrink because the chemo drug they are using in these tests was not effective. This is still a success as it proves TH-1902 could work if it had the right chemo drug attached to it.
- Preliminary data that shows the drug to be safe at lower dosages that are still strong enough to have a favorable impact on tumors.
- Preliminary data could show that the peptide portion of TH-1902 alone has cancer killing effects in that it clogs up the cancer cell’s sortilin receptors, thereby preventing the cancer cell the ability to feed itself and grow.
There are many, many different ways this could go, including that the drug is not safe and/or does not work. Since this is a phase I trial, and because THTX is trailblazing with this PDC approach, the risk of something not going right remains significant. At the same time, we are now 4 months into this trial and it has not yet been stopped due to safety issues, so that is a very good sign. Second, we can reasonably surmise the dosage level now being tested is large enough to have an impact on tumors. Third, the company has indicated it will not be able to give us preliminary data until the fourth quarter and that suggests they expect the trial to run at least until its scheduled conclusion in mid-September. If so, we should be encouraged as that likely means the human testing is following along reasonably close to the pre-clinical animal testing and that they are able to infuse patients with very large doses of TH-1902 without side-effects. The longer the trial goes, the higher the dosage level that is being safely administered, then the greater the chance of success in diminishing tumors. If so, the confident statement the CEO made in last week’s conference call that TH-1902 and THTX’s entire Sort1+ program could transform the way cancer is treated becomes a little closer to reality.
- On the NASH partnership, I have to wonder what went on behind the scenes. My sense, and that is all it is, is that the CEO wanted to move forward with the NASH trial but the board looked at the sizable financial implications and said he had to partner it. After a really bad share offering earlier in the year, the board likely correctly realized they could not raise any additional funds by selling shares at low prices right now to help fund the higher NASH expenses. I am not sure what amount of money THTX would have needed to have in the bank to start the NASH trial on their own, but once the cost increased due to the revised number of patients, what they had in cash on hand was likely deemed by the board, and perhaps by the contract research groups they would need to employ for the trial too, as not enough. Now, with the ability to have a look at the trial results after 400 patients had completed their treatment, I would have thought the costs needed to get to that point would have been covered pretty well and any additional funds needed to complete the trial could have been raised if those early results were good.
One good outcome of this may be that our CEO got a good education on the importance of having a high share price. Had the share price been higher, they could have raised more money than they did back in January and he may not have been forced into partnering due to financial considerations. Hopefully, that lesson was not lost on him.
One reason they had to say something about the NASH trial was they had already announced the trial would start at the end of the third quarter. I had always surmised that the reason they delayed the start of the trial until then is they knew they would have some cancer results before then. If the phase I cancer trial was going well, it makes sense for the company to make that its focus since there is a chance they could speed through cancer trials and get their drug on the market sooner than NASH could be approved. But they also know they could get a lot of partnership money from signing deals with companies which own cancer drugs. Could it be that the CEO’s strategy is simply to delay any decision on NASH until THTX starts to have money flowing in from cancer partnerships and this purported strategy to find a partner is just a delaying tactic? I doubt it but if cancer does lead to a lot of cash flowing into THTX’s coffers and they are unhappy with whatever partnership deals are available for NASH, then I would not be surprised if they then reversed course again and sought to go it alone on NASH because my sense is that is what the CEO wanted to do. You could tell by how unprepared they were to answer any NASH partnership questions on the conference call last week that the decision to partner NASH had likely been made the previous day at a board meeting.
Of course, what they were seeing in the cancer trial likely made the decision to partner in NASH a bit easier to make. NASH has been a drug graveyard for many companies, the phase III trial was going to be long and costly and THTX actually had very little internal expertise in running a NASH trial as they had not actually run any previously. So, if cancer is looking like it is the future of the company with its cheaper, faster trials and the unusually wide applicability of the Sort1+ technology, partnering NASH makes a lot of sense and was something I had suggested they consider previously. So, I am happy with the decision as the valuation of the stock with a cancer focus could be much higher than with a NASH focus.