Weekly Report CardWeekly Report Card - 10/16/21
Summary: THTX's stock fell by 1.4% last week despite giving the market its first glimpse, if only a very small one, into its phase 1a cancer trial. This week THTX's CMO also made a good presentation on NASH at what was most likely a sparsely attended NASH conference and the company's third quarter results were once again below analysts' expectations. THTX also announced they had hired the recently retired Chief Medical Officer of Pfizer as a scientific consultant which could be a big move with important long term implications. With both THTX's CEO having come from Pfizer and now with the recently retired CMO on board, Pfizer clearly would seem to have the inside track at any future acquisition of THTX. For finally sharing some information about the open label cancer phase 1a trial, however, the Grumpy Grader is in a bit of a better mood, so this week's grade is a "C". It could have been a higher grade but the never-ending series of quarterly headlines that read that THTX has fallen short of analysts' expectations because the company refuses to take the relatively simple action of giving conservative quarterly sales and earnings guidance which they know they have a very good chance of beating, like most other companies do, drives me a bit crazy.
Also, why only take one question from the non-analysts on the quarterly conference call. Adding that feature was a big plus since the analysts continue to ask a lot of questions that often don't address the most important issues facing THTX and seem like a waste of time. Furthermore, the way the quarterly press release noted the one patient who had experienced neutropenia made it sound far more troubling than it actually was. It became clear during the conference call that a Dose Limiting Toxicity (DLT) event, which would have been of more concern, had not actually occurred and that should have been more obvious in the way the press release was worded. Furthermore, the amount of info released about the cancer phase 1a was worthwhile but minimal. There certainly seems like more basic info could have been released so that investors could better understand exactly where we are in the trial (How many patients have been treated already? How many patients have received more than three doses? How many patients passed away like the first patient? Among many other pieces of info they could likely reveal without compromising the trial).
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, but there has not been any new progress of note recently and we actually have had to remove some of the areas of progress we noted previously due to THTX heading in the wrong direction on those issues again.
1. A new board member with capital markets experience was added (but he unfortunately does not have US capital markets experience)
2. The corporate presentation has been updated and is very well done
3. Analysts expectations for the legacy drug sales have been brought much closer to reality
4. There was a major upgrade to the company’s website
5. Allowing non-analysts to ask questions at the quarterly conference calls was a major positive
6. There has been at least some minimal insider buying of the stock (and no insider selling)
7. There has been increasing institutional interest in the stock
8. THTX's stock price has greatly outperformed the Biotech Index in 2021 (but it peaked near the middle of the year and has fallen back a bit since then)
The biggest upside catalyst for THTX's stock price is its cancer program. If the results of the phase 1a trial, currently scheduled to be released sometime this quarter, basically confirm what THTX saw in its pre-clinical work on mice, then the stock should really explode higher as it will back up previous claims by THTX management that TH-1902 could transform the way a number of cancers are treated. The minimal safety information released this week indicates the trial is headed in the right direction. But the range of possible outcomes from the phase 1a trial remains reasonably wide with many potential pathways to increased investor interest in THTX as a result of the trial data. Based on upbeat management characterizations of the trial, which they again went to great lengths to emphasize in the quarterly earnings call, and other hints we can identify, we are optimistic the trial results will be positive on some level. In particular, if even one patient showed tumor regression or other convincing evidence that TH-1902 was having a favorable impact on the cancer patient's health, that would be an important finding. If several patients showed evidence of the drug working, it would likely be perceived as a very big deal. In the end, however, we need to see the actual data to determine the path forward for THTX in cancer. It should not be too long before now we see that data and can start to make better guesses at the scale of the cancer opportunity THTX has in front of it. Phase 1a data cannot tell us too much since such trials target safety rather than efficacy but we are hopeful we will get some preliminary efficacy signals and become more hopeful every day since the amount of chemo THTX is now delivering to the patients cancer cells as this dose escalation trial comes to its close is pretty enormous. Since the trial is still ongoing the drug has been shown to be safe up to this point and since so much chemo is likely being deposited in the cancerous cells at this point, many of those cells should be being killed off. But until we see the actual data, those are just educated guesses. They disclosed the trial is currently at the point where twice the normal dose of Docetaxel is being administered to the trial participants. If it is working like it is supposed to, this means much more than twice the normal amount of Docetaxel is getting into the cancerous cells. Because the amount of Docetaxel is so large now, we should expect more DLT's to occur sometime soon and, therefore, perhaps the Maximum Tolerable Dose (MTD) to be identified soon. Finding the MTD is the main objective of the phase 1a trial and we will hear more data about the trial after it is reached.
Another potential favorable catalyst for THTX's share price in the short term is either a partnership deal that quickly crystalizes the value of their NASH program for investors or some form of alternative financing (I am not really sure what THTX means by this however) to finance its NASH phase III trial. Given the huge size of the potential NASH market, the legitimate opportunity THTX has to be successful with its phase III NASH trial and the relatively low cost of $50 million to get results on the first 400 patients in that phase III NASH trial (the full NASH trial will cost $160 million), I am no longer hopeful THTX will be able to find someone to partner with but, if they do, the terms to which they agree upon will be key to observe to see if this could be something that would move the share price. They have indicated they are having some discussions with potential partners but I do not get the sense these are at a critical phase. THTX's CEO has indicated he will start this trial at the beginning of 2022 one way or the another and if they do not find a partner, they will find a way to finance it that is "responsible" toward shareholders like us. Hopefully, we all agree what "responsible" means!
The biggest risk for THTX's stock right now is the CEO and board forcing another low-priced, irresponsible share offering down the market's throat to fund the NASH trial prior to the announcement of the cancer data. Following last year's poorly conceived share offering, another such offering would likely have even greater negative consequences for management and the board. The CEO has stated flatly that he is going to find some way to get the NASH trial started but how he does that will make all the difference. We have suggested a partial spinout of the company's NASH program in order to crystallize it value, raise the needed funds, gain better analyst coverage for the stock and reduce the risk of the trial's potential failure (NASH trials have developed a track record of failing). Perhaps THTX has a better idea but if they fall back on a low-priced share offering to finance it, that will further undermine the management and board's reputation to the detriment of the stock over the short and long term.
Another big risk to THTX's share price at the moment would be that the results of the cancer phase 1a trial turn out to be uninspiring. Given what THTX revealed this week about the safety situation so far in the phase 1a it is hard to see a scenario where the cancer program would not move forward to phase 1b, but if the phase 1a just shows the drug is safe with little preliminary evidence of effectiveness, that would be disappointing. The phase 1b portion of the trial is likely to begin in early 2022. THTX's hiring efforts also indicate they are attempting to expand their pre-clinical work into other aspects of cancer. The ultimate opportunity in cancer for THTX could be enormous, probably larger than they can handle, which could set them up for being taken over by a larger pharmaceutical company.
The other big risk for THTX's stock price is a big decline in share prices generally, which given the market's bubble mode at this time, is a bigger risk than normal. The recent sell-off in September was only about 5%, which is not nearly enough of a correction to declare the bubble as already burst.
THTX investors are especially irritated by the fact that other similar companies are getting much more highly valued than THTX during the bubble. The valuations noted below for these other stocks are hard for THTX shareholders to stomach when it is obvious that THTX has more going on than any of these companies. Here is a list of these comparable stock's market caps that show they are obtaining very significantly higher valuations despite having far less to offer than THTX, which has a phase III ready NASH program, two legacy drugs generating about $65-$70 million in annual sales and an extremely intriguing early stage cancer program:
Taimed (THTX's partner in Trogarzo and nothing else) $622 million
CytoDyn (A possible Trogarzo competitor but a joke company with no sales) $937 million
Akero (A NASH company with good results in phase 2b, nothing else) $744 million
IVA (A NASH company with good results that just started phase 3, nothing else) $546 million
PRLD (A phase 1a precision cancer stock with nothing else) $765 million
THTX (Cancer, NASH and $65-$70 million in annual revenues) $335 million
It begs the question of what THTX is doing wrong to be valued so lowly relative to these other stocks which offer, at best, only a portion of what THTX offers investors. This seems like something that should be the focus of management and the Board of Directors, especially since a fund raising is on the horizon. It is just not fair to shareholders to allow this situation to persist.
Stock Price:
Last Week YTD 1 Year Since THTX Hit its Peak (5/25/18)
THTX -1.4% 40.8% 58.6% -68.3%
S&P Biotech Index 1.2% -11.1% 4.2% 33.6%
The table above summarizes THTX’s better than index performance over the YTD and the last year. THTX’s stock price, is however, still 68.3% below the high of $11.25 it reached in late May, 2018 whereas the S&P Biotech Index is up 33.6% 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.
Trading Volume: Last week there was a decrease in the number of shares traded versus the previous week 500,000 from 582,000. Given the presentation to NASH conference and the positive update on the phase 1a cancer trial, the decline in share trading is slightly shocking. While the data shared on the phase 1 trial was hardly extensive and really should not have been expected to move the market in a significant manner, it still is amazing that this new info did not cause any notable reaction in the share price or trading volume. It may indicate that THTX has thus far failed to line up potential new investors to invest in the stock as the cancer data becomes available. Institutions simply are not paying any attention to the good message THTX's CEO is trying to communicate to them but retail investors do seem willing to listen. THTX got a gift with what happened several weeks ago when a financial advisor mentioned THTX's stock as a potential big winner on the Fox Business channel - let's hope they let it help them shape their future communications strategy in a positive way.
A year ago 686,000 THTX shares traded during this week. Two years ago during the same week, THTX traded 356,000 shares (it had just listed on NASDAQ). 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 who are best positioned to listen and respond to their message. 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. THTX needs to have in place a good plan to capitalize on this release of this important data, presuming it is good news. THTX should already know a lot about the phase 1a cancer test results and if they know they have a positive story to tell about it, they need to work very hard to build investor anticipation for those results. THTX's press release about the cancer phase 1a results will be key to attracting interest to the stock since analysts covering the stock will not likely respond appropriately to the news and drive interest in it. THTX should also have a plan to spread any good news via various media and social media platforms. Hopefully, new US based cancer analysts will also be ready to quickly pick up coverage of THTX if the cancer results are good as this will be key to getting new investors to buy it and push the share price higher.
Options Trading: There are currently 1,550 call option contracts in place and just 39 put options contracts open. Clearly, option speculators are betting much more heavily that THTX's share price will rise in the months to come. A June 2022 contract was added to the available options this week.
Presentations to Investors: THTX presented to the HC Wainwright NASH conference last Tuesday and reported Q3 financial results, along with a minimal update on the phase 1a cancer trial, last Wednesday, along with the usual conference call. Sadly, none of this seems to have changed anything with regard to the perception of the stock. The NASH presentation was well done by THTX's CMO and contained some new presentation material. Unfortunately, since NASH is not popular with investors right now and because the presentation was the last of the day, we suspect few institutional investors were listening. We would have hoped for better results from the quarterly conference call, which was also well done and included some safety data on the phase 1a for the first time, but again, we suspect few potential investors were on the call. So, THTX is making good presentations but still appears to struggle to get an appropriate reaction from investors likely because there are few new investors listening. Another notable announcement on the quarterly call which was overlooked by investors was the appointment of the recently retired Chief Medical Officer of Pfizer as a scientific advisor to THTX. There is a strong connection between Pfizer and THTX since the the CEO came from Pfizer and he has since hired a few executives from Pfizer. It is not hard to imagine that Pfizer may one day purchase THTX with all of these close connections to that pharmaceutical giant, one which is now extremely cash rich following its success with the covid vaccine. THTX's CEO also noted again on this conference call that they are talking with Chinese drug companies regarding a possible partnership in cancer. We are a bit dubious about such a partnership as there is a significant risk the Chinese intention is to steal their Sort1+ intellectual property.
THTX's CEO presented to the Cantor Global Healthcare conference two weeks ago which utilized the "fireside chat" format where the analysts from Cantor asked the CEO relevant questions about THTX's business. The analyst was not the main analyst covering biotechs for Cantor suggesting that any effort to raise money using the ATM facility set up with Cantor is not imminent. It also suggests that a report on THTX coming out of Cantor may not be imminent either. The questions the Cantor analyst asked were good and THTX's CEO did a good job of answering them. He also made a strong case for their NASH program but once again failed to note the undervaluation of THTX based on comparing their NASH asset to those of comparable NASH stocks. From our perspective, if he really believes the strong case he is making for THTX's NASH program, it is rather bizarre that he does not then make the rather straightforward and obvious comparison to other publically traded NASH stocks like IVA and AKRO that are situated very similarly to THTX in the FDA testing process. While investors should be doing that comparison themselves, they are not and they need THTX's CEO to highlight the massive disparity in valuations over and over again until they start acknowledging the obvious. While these presentations to institutional investment conferences are well done, it is pretty obvious that few institutions are actually listening to them. THTX needs to figure out a way to get on the radar screen of institutions and their cancer data is the easiest way for that to happen if it turns out to be as good as we hope it will.
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. Drs.Loomba, Harrison and Grinspoon all did a good job presenting their material in the NASH KOL. THTX does not lack for effective communicators but for communication opportunities in front of the right audiences, as we saw with the clip on the Fox Business channel this week. The more such presentations they are able to do in front of varied audiences, the better. THTX has a n intriguing history of creating value from next to nothing in both cancer and NASH and has the people who can communicate those stories well. They now just need the right audiences to present to, something LSA is trying to help them with. LSA seemed to bring a good audience for the cancer KOL but was clearly unable to do so for the NASH KOL. 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 three analyst reports published this week following the quarterly earnings call and we have seen two of them so far. One analyst has not yet written anything following the call, which is pitiful. None of the analysts' reports changed their ratings or their price targets for the stock. Once again, the analysts were all too high on their forecasts for THTX"s quarterly revenue and earnings forecasts which reflects their own shortcomings as well as THTX's incomprehensible reluctance to fix that by offering conservative sales and earnings guidance each quarter.
The analysts covering the stock just are not doing a good job and rarely have ever done so. This is a seemingly never-ending crisis for shareholders and management has failed to fix it over a very long time. While it is admittedly not easy to fix since THTX management do not have direct control over the analysts, more can be done and desperately needs to be done.
As noted previously, only the Mackie analyst wrote a report following the NASH KOL (and ignored the IV Push news). He also apparently did not listen to the HC Wainwright call before writing that report as he made no mention of the CEO saying something about looking for alternative ways to finance the NASH phase III trial. While the Mackie analyst raised his chance of success in NASH from 15% to 25%, that really does not square with the comments of the three leading scientists, who all painted a much more positive case for the drug. Additionally, the Mackie analyst, the only analyst so far who has even tried hard to put together a NASH model for THTX, is not very influential due to the small Canadian firm he works for. So, while it was nice to see a price target upgrade from him, his 25% chance of success assumption and lack of overall influence on investors led to no positive reaction in THTX's share price. He is the only analyst covering THTX that gives any credit for any aspect of THTX's drug pipeline. We suspect this will soon change if THTX is able to find a partner for its NASH program and when favorable efficacy data is announced in its cancer program.
With the company highlighting cancer on their 6/21 Cancer KOL presentation 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. 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 $335 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. Once THTX does report some cancer data, assuming it is worthwhile, it is possible they will begin to attract some coverage from US based cancer analysts but even this will likely prove to be challenging with the way Wall Street operates these days. Of course, we suspect THTX will sell additional shares following any positive cancer news and this will give the US cancer analysts a chance to underwrite that offering and start to follow the stock.
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. If a report is produced, we suspect it will be biased towards a positive conclusion, include some value for both the NASH and cancer programs and that may provide some limited support for the stock in the short term. While THTX apparently has no interest in selling shares through the ATM at this time or price (though it is always a risk they will do so given their expressed interest in pushing their NASH phase III forward), 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 firm based on getting deals versus by generating consistent research coverage that gains the respect of institutional investors. So the analyst situation with THTX, which has been a long-standing problem for the company, remains really 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: The analysts were once again all too high in their forecasts for Q3 sales and earnings. I have not yet seen all of the reports from the analysts to see if they have adjusted their Q4 forecasts to a more appropriate level. In the end, it is THTX's responsibility to get these analysts in line and why they repeatedly fail to do that is incomprehensible. It is important for the stock's reputation with investors for the analysts to report the company met or beat their quarterly forecast but in 7 out of the last 8 quarters, THTX has trailed the analysts estimates, thereby sullying the stock's reputation for something that could have easily been sorted out such that THTX beat the analysts' expectations in 8 out of the last 8 quarters. It is what almost all respectable companies do and THTX's sales and earnings trends are no so volatile that they could not relatively easily give conservative guidance like almost all other companies do so that the stock develops a reputation for meeting or beating the analysts' estimates.
Corporate Presentation: The last update to the corporate presentation took place on 7/20/21. We should see a new update of the presentation soon as THTX will likely update it now that the Q3 financial results have been released. We will be looking for material changes in the presentation when it is updated but we suspect THTX may only update the financial numbers for Q3's results at this time. A more comprehensive update will likely occur after THTX reports its cancer phase 1a results but they will no doubt include some info on the safety data they discussed on the quarterly call too.
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: THTX sent out two press releases this week - one reminded investors about the HC Wainwright NASH conference presentation and the other was the Q3 financial results release. The quarterly financial results press releases have improved significantly since the new Investor Relations officer was hired about a year and a half ago. This quarterly press release, however, did contain a less than ideal characterization of a patient in the cancer trial suffering from neutropenia.
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 tends to fall.
LSA Activity: There were no new LSA-related events this week but LSA could have been active behind the scenes. LSA was the sponsor of the NASH KOL event and it seems clear from the non-reaction to the event that they were unable to provide interested listeners to the call. So, while they did well with the cancer KOL in June, we really cannot give them any credit for creating the right audience for the NASH KOL. However, as we already noted, LSA had a difficult job in creating interest in a NASH presentation with NASH in the dog house from the perspective of most investors following the failed drug trials of other prominent NASH players.
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. It was interesting to see how much more effective one financial advisor recommending THTX's stock on the Fox Business channel was than any of LSA's efforts so far. And, unlike LSA's consulting services, it was free too!
Retail Investor Engagement: Once again, there was no new evidence of retail investor engagement by THTX in the last week. The very positive reaction from retail investors watching the Fox Business channel show where a financial advisor recommended THTX's stock was a fantastic indication of how THTX's stock price could benefit from greater outreach to retail investors. Let's hope this strong message was received by THTX's management and they start to alter their approach to get the same good results so many other small companies have gotten by focusing on retail investors.
Apparently, LSA’s job includes attracting high net worth, retail investors to THTX. 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. The number of THTX followers on Stocktwits fell by 2 last week to 943, but this remains 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: 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.
One of the biggest negatives surrounding THTX has always been the low level of insider holdings and the lack of much buying activity in the stock. That has been true even when the stock was doing well. Ideally, we would see more frequent insider buying of the shares and that such purchases would be substantial from those board members who have the financial capacity to make larger purchases.
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 meaningful new filings indicating significant 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 several 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. Unfortunately, he has not mentioned it since that time. The undervaluation of their NASH assets is very apparent as THTX's NASH program is fairly similar to the programs both IVA and AKRO have ongoing and these two stocks have market caps of over $500 million and $700 million respectively while THTX's total market cap, which also includes two already approved drugs and its very intriguing cancer asset, is just $335 million. THTX's NASH program alone is likely worth more than $335 million on its own based on the valuations these other companies are getting and it would make a lot of sense if THTX's CEO highlighted this fact in any presentation he gives. It should be something they highlight on a chart in their presentation. It is just not reasonable for a CEO to not draw the market's attention to an asset worth as much as $500 million and which is being ignored by investors. I think things like this are covered in the first chapter in the book used in CEO 101 classes! And if THTX's NASH program is not worth as much as IVA's or AKRO's, then THTX's CEO should tell us why.
The message is very clear - whatever THTX is doing to connect with investors so that its stock price is valued like many other similarly positioned stock is not working anywhere near as well as whatever these other companies are doing. And this has been true for an unacceptably long period of time.
Again, suggestions for improving this are welcome.