I recently doubled my position in Telesta Therapeutics (TST.TO), because of positive developments in their quest to commercialise a revolutionary new treatment for bladder cancer. Unbelievable but sadly true, people suffering from bladder cancer haven't seen any improvement for this horrendous disease in almost 20 years (!). So there's no doubt it's about time for a new treatment. There's also no doubt about the massive revenue potential here. Many late-stage cancer stocks are in valued in the billions because of the enormous upside of a safe and effective new treatment. Even despite the recent biotech weakness, the immunotherapy index is still one the best performing indexes in the stock market. Note that Telesta is currently valued at just C$120 million, a fraction of equivalent cancer biotechs.
I also added, because I believe averaging up in a great company is a winning investment strategy. I don't understand why investors double down on poor performing stocks. I sell losers quickly. Risk management is key.
But back to Telesta; my readers may recall that I, about a year ago,
released a bullish article about this company when it still carried the name Bioniche. Shares almost doubled since, so the first inning has been reached. I still think we're still looking at a potential 10-bagger here. More importantly, management is doing a great job. They successfully filed a BLA to the FDA and conducted a big raise under impressive terms with no discount (!), no warrants (!) and insiders participating. This is very rare in the biotech space. Very telling too, so I immediately added the day after the financing announcement. The FDA on their part accepted the BLA and designated it a priority review status; February 27th 2016 is the review goal date. Keep this date in mind. It will probably be the most important day in the company's history.
You may wonder, why didn't the stock double or triple on the good news? CANF for example, tripled instantly on a sudden fast-track designation. Although Telesta's share price did jump, millions of warrants got in-the-money. Warrant conversion triggers 'artificial' selling pressure. Another example where warrant conversion played a big role was in CRBP. This stock doubled on fast-track news, but had to gave up all the gains because warrant holders started exercising. But the warrant-driven selling pressure won't last forever. A lot of warrants have already been exercised. Also, millions of 40 cent warrants will expire this month. It's a bit hard to tell how many exactly are left to be exercised, but I don't think they will play a role much longer. Once the supply dries up, the share price is bound to surge. The investors who participated in the recent raise see their lock-up period end in December, so there could be selling pressure coming up from cheap $0.34 shares but they are long-term investors seeking a multi-bagger return from what I understand. We'll have to see how this all enters into the equation. Actually, the warrants can be considered a gift, because they do not only automatically raise money for the company, but also provide(d) an ample supply of cheap shares. I can't buy CANF anymore, because this stock shot up so much.
The key question is of course, how likely is market approval? I think the odds are very good. Why? Telesta's lead drug MCNA has proven to be safe and effective in various tests. You can learn more about it
here. Also, history points out that out of 49 drugs recommended by Adcom, 43 were approved. This equates to a success ratio of nearly 90%!
In sum, we have a cashed up Phase III late-stage biotech company with great odds of obtaining market approval for a revolutionary and unique new treatment against bladder cancer within 6 months from now that is valued absurdly low compared to peer companies. That's why I designate Telesta Therapeutics as a multi-bagger in the making.