Post by
SPCEO1 on Oct 22, 2021 9:44pm
Weekly Report Card
Weekly Report Card - 10/23/21
Summary: THTX's stock fell slightly (by 0.6%) last week during a week where the company did little to interact with the market. On Friday, THTX briefly awakened and sent out a press release highlighting the success of its cancer drugs against something called Vascular Mimicry (VM), an important way cancer cells grow. The stock did not react to the news of this publication, likely because almost no significant investors are paying attention to developments at THTX at this time. The news itself at first seemed to be a more thorough evaluation of THTX's cancer drugs impact on VM versus when they first announced this about 16 months ago. But perhaps because they had already highlighted the positive impacts on VM some time ago, the market did not take much notice. We believe there was a lot more of note in this new article but few people are paying attention, so the news was cast aside without generating a reaction in the share price. This is not a good look for the finance team at THTX and they need to get this fixed before even bigger news about TH-1902's efficacy comes out later this quarter. As a result of the overall weak effort off interacting with the market this week and the somewhat alarming non-response to the publication of this article, the Grumpy Grader is pretty grumpy again, so this week's grade is an "D". It is getting more than a bit tiresome that good news is often met with a collective yawn by the market with THTX. Something has to change, particularly with the prospect of very good news on the horizon.
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 potential 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 last 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 last week's 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 actually much more than just 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 Dose Limiting Toxicities (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), there should be a partner who would be interested but I am no longer hopeful THTX will actually be able to find someone to partner with. 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 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 and another competitor's trial failed this week). 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 still 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 and share prices have quickly recovered indicating the bubble remains intact for now.
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) $605 million
CytoDyn (A possible Trogarzo competitor but a joke company with no sales) $990 million
Akero (A NASH company with good results in phase 2b, nothing else) $740 million
IVA (A NASH company with good results that just started phase 3, nothing else) $580 million
PRLD (A phase 1a precision cancer stock with nothing else) $824 million
THTX (Cancer, NASH and $65-$70 million in annual revenues) $333 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 -0.6% 40.0% 69.9% -68.5%
S&P Biotech Index -0.7% -11.8% 6.3% 32.3%
The table above summarizes THTX’s better than index performance over the YTD and the last year. THTX’s stock price, is however, still 68.5% below the high of $11.25 it reached in late May, 2018 whereas the S&P Biotech Index is up 32.3% 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 seems to indicate 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 and which could ultimately prove to be an enormous business opportunity.
Trading Volume: Last week there was a decrease in the number of shares traded versus the previous week, falling to 371,000 from 500,000. Given last week's presentation to a NASH conference and the positive update on the phase 1a cancer trial, the appointment of Pfizer's CMO as a Scientific Consultant, word that Chinese drug companies are interested in partnering with THTX on cancer and the publication of an in-depth article on THTX's cancer drugs favorable impact on Vascular Mimicry in cancer cells, the decline in share trading this week flat-out shocking. SOMETHING IS WRONG WITH THIS PICTURE AND NEEDS TO BE ADDRESSED QUICKLY! That is a lot of good news without the stock moving at all in reaction to it. 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. So far, however, THTX continues to inexplicably ignore the substantial opportunity staring them in the face from the very vibrant retail investor market while pursuing institutional investors who cannot buy their stock even if they wanted to due mostly to its low price and small market cap.
A year ago 301,000 THTX shares traded during this week. Two years ago during the same week, THTX traded 404,000 shares (it had just recently 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. Little we have seen so far, however gives us much confidence that such plans might be in place - hopefully, they are just out of our sight right now.
Options Trading: There are currently 1,108 call option contracts in place (versus 1,550 last week) and just 3 put options contracts open versus 39 last week. Clearly, option speculators are currently betting much more heavily that THTX's share price will rise in the months to come as seems reasonable given the proximity to news on the phase 1a trial. But the number of both calls and puts declined last week as speculators got more conservative last week.
Presentations to Investors: THTX still has not updated its corporate presentation since July 19th. This may be because they have not had an opportunity to give a standard corporate presentation recently but they really should be more proactive in updating the presentation for potential new investors in the stock. To someone just showing up at the THTX website to check out the stock, the impression is that noting important has happened since late July, which is not a good look. Also, HC Wainwright held a Precision Oncology conference this week and we were disappointed THTX did not take advantage of this opportunity to get on the radar screens of the type of investors who are interested in this type of stock. It seems like a big missed opportunity to announce their arrival on the scene in targeted cancer treatment space.
THTX's CEO presented to the Cantor Global Healthcare conference three weeks ago which utilized the "fireside chat" format where the analyst 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. The biggest negative THTX has in comparison to these two companies is that its phase III NASH trial is not yet launched and is currently looking for a partner. IVA's NASH drug has a Breakthrough Therapy designation from the FDA and AKRO's NASH drug was recently given Fast Track status. Despite these shortcomings versus these two competitors, we still believe the market is failing to give much, if any, value to THTX's NASH asset, which is ridiculous. 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. New Scientific Advisor Dr. Rothenberg no doubt also has excellent presentation skills or he would have never have made it to be Pfizer's CMO. THTX does not lack for effective and notable 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 finally find a way to get the right audience to actually hear the very good things they have to say.
Analyst Reports/Comments: There was one analyst report published this week from Canaccord. In this case the analyst was several days late in getting out his report on THTX's quarterly results, but that did not matter much since his report said next to nothing of interest.
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, 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 guess I should not be shocked to see that Bloomberg indicates the analysts are expecting sales of THTX's two legacy drugs to be significantly higher than I think is likely in THTX's fourth quarter. These analysts are really so bad and simply do not learn from their past mistakes. It is hard to believe they actually keep thinking THTX's sales will be better than is reasonable to assume based on the past trends, the competitive situation and data available on sales of the drugs from Bloomberg as the quarter develops.
In the end, however, it is THTX's responsibility to get these analysts in line and why they repeatedly fail to do that is truly 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 not 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. I just cannot comprehend why THTX does not take this simple step to eliminate this problem. They should never complain about the analysts being bad as long as they are unwilling to take control of the situation by offering more sensible sales and earnings guidance.
Corporate Presentation: The last update to the corporate presentation took place on 7/20/21. We have to believe we will soon see an updated presentation with Q3 financial results, the new safety data from the phase 1a cancer trial, the new data from the VM article published this week and some mention of the new Scientific Advisor. Perhaps there is some new information THTX expects to announce soon and they are waiting for that before making a long overdue update to the presentation. As noted earlier. it looks like nothing much has happened at THTX since late July to any new investor coming to check the company out, which is not the look you want.
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 just one press release this week - the notification of the new article on THTX's cancer drug candidates on VM in an academic Journal called Frontiers in Oncology. The article was very interesting but the press release still generated no interest from investors, which was curious. It once again indicates that there really is no one paying much attention to THTX and few who are looking with anticipation to such new information about THTX's very intriguing and possibly company transforming cancer program.
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. So far, there is zero evidence of that.
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 remained at 943 this week, but this is a pitifully small number and highlights the company's foolish disdain for retail investors in the current environment and in light of THTX's small size. 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 were to small insider buys of the stock in the last week. While better than no activity or insider selling, the smallish buys by two directors were unlikely to convince investors they had better pay attention to this stock.
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. The next significant update in this section will come in mid November when institutional investor filings will indicate what changes they made in the quarter ending 9/30/21. Given that share trading volume has been pretty low recently, we do not think there has been much institutional ativity in the stock lately.
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.