Post by
SPCEO1 on Dec 18, 2021 11:33am
Weekly Report Card
Weekly Report Card - 12/17/21
Summary: THTX's stock fell 3.3% last week on no news but It also performed much, much worse than the 5.5% advance in the biotech sector last week. The NASDAQ 100 Index, however, also fell by 3.3% last week, so it was a bit of a mixed up mess in the markets last week. As we noted last week, THTX's management seems incapable of building any anticipation among investors regarding a potential favorable outcome of the phase 1a trial. THTX's unwillingness to communicate more regularly and clearly with investors is a big part of the stock's drifting lower in the second half of 2021 following a promising start on the back of their very intriguing cancer phase 1a trial that has the potential to be very rewarding for shareholders if the results show the promise the preclinical studies showed. While the company has given a number of hints about the prospects for their drug via a number of actions, the status of the trial is still far less clear than it could be leading investors to be somewhat confused about exactly where the trial is at this point in time. There is no need for that to be the case and THTX should make a clear statement about what dosage level the trial is at right now, how many patients have been treated, how many have shown side-effects and how long the various patients in the trial have been treated, etc. It is hard to understand why they feel they cannot share basic information like that in an open label trial like this one.
THTX had no press releases again this week and no other public interactions with investors. Additionally, they removed the corporate presentation from their website but did not replace it yet with an updated one. As often has been the case, it does not seem they really try very hard at winning over investors, even when the story they have to share with investors appears to be a good one. The only action the company took this week was to make a couple of SEC filings regarding the updating of the prospectuses tied to their $150 million shelf offering and their potential $50 million At The Market (ATM) share offering. No significant new information was contained in these documents although one did indicate the proceeds from the $50 million ATM offering would be spent on cancer research rather than NASH. This seems to be another indicator that THTX sees some noteworthy potential in cancer and that their phase III NASH trial has been further pushed back in their list of priorities.
In view of the continued absence of activity from THTX to engage with the investment community and to properly promote THTX's share price the Grinchy Grader (in honor of the Christmas holiday the Grumpy Grader has been temporarily renamed the Grinchy Grader), as you would certainly expect, is still grinchy. This week's grade remains an "F". If THTX doesn't actually do anything overt to promote the stock to new investors, they will continue to get failing grades. The Grinchy Grader would much prefer to be cheerful but THTX's poor recent behavior and the downtrend in its share price since the middle of 2021 has made that impossible. Maybe that is about to change in a very positive direction, but until something is announced that would justify a more cheerful attitude, we have to work with what we have in front of us. The trend in recent weeks on shareholder engagement has been very negative and it is hard to watch the company fall off the pace after some progress was made in the first half of 2021. The recent loss of the Investor Relations Officer due to a personal situation clearly is hurting their efforts but that is still not a good excuse for not being active on the investor relations front in recent months. THTX did set up some meetings with large shareholders this week for late in January and we hope those are designed to share good results of the phase 1a trial with shareholders who have waited a very long time for some good news.
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 and we note them below. Unfortunately, THTX needs to remember their successes noted below, which took place mostly in the first half of the year, are not going to gain them credit indefinitely. Nothing new has been added to the list below recently, indicating THTX has slowed its progress. New progress must be made and we will not be including many of the positive developments below for too much longer because they occurred much earlier this year.
1. A new board member with capital markets experience was added (but he unfortunately does not have a lot of US capital markets experience)
2. The corporate presentation is very well done
3. There was a major upgrade to the company’s website
4. Allowing non-analysts to ask questions at the quarterly conference calls was a major positive (but taking on one question from this source in Q3 was a mistake)
5. There has been some recent insider buying of the stock (and no insider selling)
6. There has been increasing institutional interest in the stock
7. 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 since then)
8. Adding Dr. Rothenberg, recently retired Pfizer CMO, as a Scientific Advisor was fantastic
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 between now and January, 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. At the recent Credit Suisse conference, THTX revealed some additional info that highlighted the phase 1a trial is moving in line with what they saw in the pre-clinical work, which is a very positive development. The minimal safety information released previously, along with the length of the trial, also 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 were again on display at the recent Credit Suisse conference, and several other hints we can identify, we are optimistic the phase 1a trial results will be positive on some level. 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, which would be an important finding. If several patients showed evidence of the drug working, it would likely be perceived as a very big deal, at least by those investors who are paying attention to developments at THTX, which appear to be a relatively small number. We suspect the company may soon be moving to a dosage level of roughly 3x the normal Docetaxel dose, which, if true, is quite encouraging. 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 we see that data and can start to make better guesses at the scale of the cancer opportunity THTX has in front of it. But make no mistake, it has the potential to be a huge opportunity for THTX. THTX stated at the Credit Suisse conference that they are somewhat overwhelmed by the numerous potential strategic options in cancer and that they have already begun to receive "inbound interest", which we believe is a code word for contacts from larger pharmaceutical companies looking to partner with THTX. Still, phase 1a data probably 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 patient's cancer cells as this dose escalation trial comes to its close is pretty enormous. Since the trial is still ongoing the drug has obviously been shown to be safe so far (it would have been shut down already if it had become unsafe) 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. The last we heard the trial is at the point where twice the normal dose of Docetaxel has likely been administered to multiple trial participants and evidently has proven safe at that level. If that is right, they will soon start dosing patients at 3 times the normal dose of Docetaxel. If TH-1902 is working like it is supposed to, this means actually much more than just two or three times 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, which could potentially not occur until early next year if the drug proves safer at higher dosage levels than we currently believe likely.
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 should the first 400 patients show promising efficacy and the trial proceeds to its full conclusion), 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. Interest in NASH from potential partners has dried up quite considerably due to the many failures other NASH companies have experienced (although Arrowhead Pharmaceutical signed a very significant NASH partnership with Bristol Myers recently). If they do find a partner, 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. At the Credit Suisse conference, THTX indicated it would be helpful if another NASH stock would achieve some success in one of their studies (I suspect they were referring to MDGL's study which will report out some results soon) so that larger pharmaceutical companies would once again get interested in NASH if that happened. 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 current shareholders like ourselves. Hopefully, we all agree what "responsible" means! Using the ATM to fund the NASH trial does not seem to be a consideration at this time/share price and I suspect they may be looking to fund the trial by slowly borrowing against their accounts receivable, but that is just a guess based on how they phrased what they said. Additionally, THTX's CEO's claims they plan to start the NASH phase III trial in early 2022 may simply be part of a broader negotiating strategy with potential partners and may not come to pass. Ideally, THTX gets great results from its phase 1a cancer trial, sees the stock price advance considerably on the back of that and then raises the money for the NASH phase III trial either through sale of new shares at a more attractive price level and/or upfront payments from cancer partnerships with larger pharmaceutical companies.
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 he is going to find some way to get the NASH trial started by early 2022 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 was recently a hot commodity among investors but the recent spate of NASH drug failures has cooled that enthusiasm considerably, which would likely make a spin-off challenging even if there is obvious value in THTX's NASH operation when compared with other NASH drug stocks. Perhaps THTX has a better idea but if they fall back on a low-priced share offering to finance it, or using the ATM at the current low price level, that will further undermine the management and board's reputation to the detriment of the stock over the short and long term. Post the comments at the Credit Suisse conference on this subject, we think another low priced share offering is not likely, thankfully!
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 about the safety situation so far in the phase 1a it is now hard to see a scenario where the cancer program would not move forward to phase 1b, which is encouraging. But if the phase 1a just shows the drug is safe with little preliminary evidence of effectiveness, that would still be disappointing as it means another wait until the phase 1b shows efficacy or not, which would likely occur at the earliest in the Spring of 2022 after patients in this trial had received several rounds of TH-1902. The phase 1b portion of the trial is likely to begin in early 2022 and it would be more focused on efficacy versus safety focus of the phase 1a. THTX recently indicated the company is reallocating research resources away from TH-1902 sister drug, TH-1904,and towards a PDC that would be combined with SN38, another, more potent chemo drug, but this is just one of many possible approaches the company will have in front of it if they can prove their technology works as the preclincial trial indicated it would. 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. Recently, the market has been showing signs that the bubble might be beginning to burst, so this risk could become very real very soon. Many stocks outside of the very, very large US technology stocks have already seen their share prices plummet. And just because THTX has not been swept up in the favorable upside moves during the bubble over the last three years does not mean it will not get caught up in any general sell-off in the market. The new threat from the new Omicron covid variant only heightens this risk but seems less concerning as new info is produced on this variant.
THTX investors are especially irritated by the fact that other similar companies are getting much more highly valued than THTX during the bubble. This has been true for an unacceptably long period of time and THTX has failed repeatedly in their attempts to fix the situation. To be honest, it has not always been easy to understand why this situation has persisted for such an unseemly length of time but clearly a new strategy is called for. 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 with Fast Track status granted while the program was still in the preclinical stage, a rare circumstance:
Taimed (THTX's partner in Trogarzo and nothing else) $657 million
CytoDyn (A possible Trogarzo competitor but a joke company with no sales) $687 million
Akero (A NASH company with good results in phase 2b, nothing else) $737 million
IVA (A NASH company with good results that just started phase 3, nothing else) $569 million
PRLD (A phase 1a precision cancer stock with nothing else) $647 million
THTX (Cancer, NASH and $65-$70 million in annual revenues) $302 million
It begs the question of what THTX is doing wrong to be valued so low 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 likely 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 -3.3% 27.6% 42.4% -71.4%
S&P Biotech Index 1.7% -17.9% -21.5% 23.3%
The table above summarizes THTX’s much better than index performance over the YTD and the last year. THTX’s stock price, is however, still 71.4% below the high of $11.25 it reached in late May, 2018 whereas the S&P Biotech Index is up 23.3% 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 since departed 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, although the stock has struggled since the middle of 2021. 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 whole Sort1+ technology platform, of which TH-1902 is the first part and which could ultimately prove to be an enormous business opportunity.
Trading Volume: Trading volume this week was 482,000 shares versus around 534,000 shares last week. This low trading volume is quite disappointing and again reflects the failure of the investor relations effort at THTX. Between insider buying, the recent grant of stock options to management and the board and the rapidly approaching phase 1a cancer results, you would think it would not be hard to draw attention to THTX and get some investors interested in taking a position in it. Given the backdrop of a stock market bubble, gaining investor's attention and increasing the trading interest in THTX should be about as easy as it ever is going to be right now yet just the opposite seems to be the case. It certainly seems to 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 a couple months ago when a financial advisor mentioned THTX's stock as a potential big winner on the Fox Business channel - let's hope they let that experience 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. Hopefully, a new Investor Relations officer will help get this situation turned around but it is not clear how long it might take to get someone in this role.
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. THTX needs to have in place a good plan to capitalize on the release of their important cancer phase 1a 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 currently 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. The low trading volume in the stock indicates any plans they are working to put in place are not leading to investors showing more interest in the stock. With the investor relations position now temporarily empty, the challenge is going to be even greater for the company to get any good word on cancer out to investors.
Options Trading: There are currently 2,254 call option contracts in place (versus 2,174 last week) and just 18 put options contracts open versus 19 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 traded over the last week, as well as the open interest in THTX options, was insignificant and also highlights the general lack of interest in THTX. It is particularly odd given the prospect for cancer results causing volatility in the stock, which is normally something options investors are attracted to. The lack of a vibrant options market in THTX is another indicator of a failed investor engagement effort.
Presentations to Investors: THTX made no presentations to investors 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. 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 were no analysts' reports published this week. The last time any of the three analysts actively covering the stock wrote on it was in mid-October following the third quarter results.
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.
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 high quality 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. On a year-over- year basis, it looks like Egrifta sales may have risen about 2% in 4Q21 while Trogarzo sales likely rose about 27%. Compared to 3Q21, Egrifta sales fell about 6% and Trogarzo sales rose about 14%. We are not sure however about how the sales in Europe affect these estimates which also come from the always suspicious Bloomberg database. The increased Trogarzo sales may be reflecting new sales from Europe.
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: THTX finally removed the old corporate presentation but did not replace it with a new one. So, that is not the progress we were hoping for in this area. Where the corporate presentation was located on the company's website now just says "More information coming soon". Removing the old presentation may be an indicator that big news is coming soon which will result in the need to revamp the presentation in a big positive way, but it could also mean the opposite.
Before it was removed, THTX’s corporate presentation is 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: There were no new press releases this week.
On the issue of press releases, I would suggest that THTX stop piling various announcements into one press release. For example, the announcement of Dr. Rothenberg joining THTX as a Scientific Consultant was actually a pretty big deal but THTX buried it in the midst of their Q3 earnings result press release. Anything THTX can separate out and gain additional focus on is a good thing. Why not have a stand alone press release for Dr. Rothenberg's appointment as well as a conference call with him discussing his thoughts on TH-1902 and the whole Sort1+ cancer platform THTX is developing?
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 in September 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. As best we can tell, the LSA engagement has not been a great success for THTX so far but we understand that LSA is helping fill the void left by the departure of the Investor Relations Officer.
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: There was no retail investor engagement this past week.
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 rose slightly to 935 this week versus 931 the previous 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 website improvements this year 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. There have been no recent improvements to the website, however.
Insider Trading Activity: There was no additional insider buying this past week following some meaningful purchases recently. There were, however, large stock option grants given recently to the management team and board members. Since insiders get these grants, there is a low incentive for them to purchase shares in the stock on the public market.
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. But we would note that insiders have purchased over $700,000 worth of the stock over the last year. So, things are getting a bit better on that front.
Insider trading in THTX usually comes in spurts as the insiders are prevented from buying or selling most of the time. When a window for insiders to trade occasionally opens, there has only infrequently been much trading. Almost all the trading has been on the buy side when it has happened in recent years. With the former CEO and former board Chairman Paul Pommier now retired, two of the largest insider holdings are no longer present. Overall, insider holdings of THTX are low reflecting the fact that THTX is not a young company so the original insiders have been diluted over the decades. Also insiders have the opportunity to pick up cheap shares via options, which is more attractive to them than buying them on the open market. Still, it would be nice to see more insider buying. Our new CEO should be credited for picking up a sizable number of shares during his still short stint with the company even though he is entitled to receive a very large number of shares via options.
Changes in Institutional Investors Shareholdings: There were no new meaningful changes in institutional holdings in THTX last week. The next time we should see meaningful reports of changes in Institutional holdings will be next February although there are often some reported before the required filing date.
The third quarter regulatory filings showed some notable changes in holdings. Several smaller institutional investors slightly added to their holdings in THTX and some slightly reduced their holdings. Two larger shareholders, AIGH and Caisse de Depot, significantly reduced the number of shares they held at 9/30/21. AIGH sold about 553,000 shares and they now hold just over 3 million shares while Caisse De Depot sold about 1.6 million shares and now hold 402,000. This institution once was the largest holder of THTX shares but has been steadily reducing their holdings in recent years. Despite these sales, there were slightly more institutional buyers than sellers in the third quarter and Morgan Stanley added the most shares - 2.3 million shares - more than doubling their previous holding. We believe these shares may be held on behalf of hedge funds with whom Morgan Stanley has a prime brokerage arrangement with. More importantly, the cancer investing specialist Soleus also added significantly to their already large holding in THTX. Since Soleus is very knowledgeable in the realm of cancer with medical researchers on their staff, the fact that they continue to build their already large position is likely a very good sign for the progress in the phase 1a cancer trial.
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 back in August 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 $600 million respectively while THTX's total market cap, which also includes two already approved drugs and its very intriguing cancer asset, is just $302 million. THTX's NASH program alone is likely worth more than $302 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. Hopefully, an upgrade in the Investors Relations role will bring about some needed improvements.
Again, suggestions for improving this are welcome.