Weekly Report Card - 08/21/21 Summary – THTX’s stock fell 3.4% last week despite announcing a Key Opinion Leader (KOL) event, sponsored by LSA, on its NASH phase III program to be held in the second week of September. Notably, the KOL’s who will be presenting at this meeting are the best of the best in the NASH business, so it is a very impressive event. While very happy to finally see THTX trying harder to inform the market of what they have in NASH, and hopefully to see the stock price better reflect that opportunity (we do not believe the stock currently contains any value for NASH at all), we are somewhat surprised and a tad confused about the decision to hold this event now. It seems to us the initial reaction they may have received from potential partners in NASH has been less than desired and they are going into marketing mode on NASH in order to stimulate better partnership offers or to boost the share price in preparation for using the ATM facility to issue the shares needed to fund the phase III, or perhaps just the first 400 patients in that trial, on their own.
THTX stock was under selling pressure this week, as it was last week, for no apparent reason. There was minimal news released on THTX over the past two weeks but that which was released was not only good news but important news. We suspect the odd selling with that good news backdrop might be related to THTX’s largest shareholder having to sell some shares in THTX following the very poor performance in that funds two largest shareholdings which made up over 35% of its holdings not too long ago. So it is hard to blame THTX management for that if that is indeed what happened. Perhaps the biggest news for THTX this week is it was another week where there was no news about the cancer phase 1a trial indicating that it continues to progress, which is exactly what we want at this late stage of the trial where the highest dosages are being administered. But with the stock falling this week, we can only give a grade of “B” again.
August has many times in past years been a slow month for investor engagement from the company due to vacations, both within THTX (French Canadians often operate more like Europeans when it comes to summer vacations with many taking much of the month of August off) and among those investors THTX might seek to engage with. And there has not been a lot of investor-focused activity in August, but what has occurred has been reasonably significant. Still, we at the THTX Weekly Report Card never take a week off (at least not yet)!
Once again, despite our general grumpiness in handing out these weekly grades, 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
- A new board member with capital markets experience was added
- 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 indications of increasing institutional interest in the stock
- Trading volume in the stock has picked up notably in recent weeks
- THTX scheduled a NASH KOL event for the second week of September which should bring attention to the merits of this asset that the market has basically ignored.
While we are pleased with that progress, there remains a lot of work yet to be done if shareholders hope to see the best possible outcome as THTX continues what increasingly looks like a very intriguing and worthwhile adventure with its cancer drug TH-1902. And we should not forget about NASH, where a forthcoming partnership, should such a deal be achieved, deal could crystallize some shareholder value very quickly as well. The concerted effort they are finally making to highlight NASH to investors via the LSA sponsored KOL event is a worthy endeavor.
Stock Price: Last Week YTD 1 Year Since THTX Hit its Peak (5/25/18) THTX -3.4% 34.8% 22.1% -70.0%
S&P Biotech Index -2.0% -13.2% 8.5% 30.2%
The table above summarizes THTX’s better than index performance over the YTD and the last year. THTX’s stock price, is however, still 70% below the high of $11.25 it reached in late May, 2018 whereas the S&P Biotech index is up 30.2% 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 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 regarding THTX’s cancer drug, TH-1902, or more appropriately its Sort1+ technology platform, of which TH-1902 is the first part. The recent weakness in the share price is unexpected given the good developments which have occurred recently and we suspect the lower stock price might reflect problems THTX’s largest shareholder might be facing.
Trading Volume: Last week THTX traded close to 468,000 shares, a sharp fall-off from the 977,000 shares traded during the previous week. Clearly, there has been a motivated seller in the market over the last two weeks as the news has been all good for THTX during that time. One can never be sure what is motivating a seller but we are not aware of any reason someone should be in a hurry to sell THTX right now with a number of key events on the immediate horizon. As of Friday, it seems that this seller that has been weighing the stock down may have completed their sales. Still, THTX often lacks sufficient buying interest to keep the stock moving higher.
A year ago trading in THTX was average with 540,000 shares changing hands. Two years ago during the same week, THTX traded only a paltry 122,000 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.
Presentations to Investors: There were 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 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.
Analyst Reports/Comments: There were no new analysts’ reports written on THTX last week.
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 $360 million is a big impediment to most institutions buying the shares at this point, 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.
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.
Appropriate Analyst Expectations: There is no change from last week in this section.
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. 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 but LSA did announce the NASH KOL event.
LSA Activity: LSA sent an e-mail this week informing investors about the 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. If LSA is good at what they do, the cancer 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 recently 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. I would have hoped to have seen more of an obvious impact from LSA’s involvement by now.
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 905 followers on Stocktwits, which is a pitifully small number but did rise by 3 new followers last week. 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: I noticed the “Investors” section of the website had disappeared today. I am not sure how long it has been missing but hopefully they are doing something to improve it. More likely, it is just a weird glitch. The “Investors” section of the French version of the website is still there so it does not appear they are overhauling that section of the website.
Overall, 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 ranted 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: 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 last 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 that the stock 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
Weekly Grade - B – Given the lower share price this week, we cannot give an “A” but the announcement of the NASH KOL event, via LSA, with such a sterling group of KOL’s presenting was a very good development and that offsets the lack of other investor engagement efforts this week. There is still much to be done, however, to earn a higher grade.
Again, suggestions for improving this are welcome.