I am an active participant on the site StockTwits with the user name growacet.
Its basically Twitter for stocks, but instead of # hashtags stocks are discussed using the ticker symbol with a $ dollar sign in front. I have about 175 followers, and likely a similar number of ignores. I'm sure a lot of $ZIOP bulls blocked me because they didn't appreciate my bearish opinions when that stock was trading at $13+ and I wasn't buying into the bullish predictions of $20+.
I was recently asked on that site for a one year price target on $RVX.CA
Personally I find trying to assign a future price target on a speculative stock to be something of a mug's game, but I did offer up the opinion that I could see RVX attaining a market capitlization of $1 billion USD if the company's phase III BETonMACE trial passes the halfway point futility analysis. To give that some context the current MC is just under $100 million USD.
Why do I consider assigning a target price to be a mug's game?
With speculative stocks there are so many variables, and with development stage biotech, ultimately the biggest variable is success or failure. At least in Resverlogix's case the finish line is within sight given that they've reached a phase III trial for their lead compound Apalbetalone also known as RVX-208. But still, setting a price target is fraught with uncertainties and unknowns.
But targets are put out all the time, and I assume the reason is because that's what investors want. If a stock is trading for $1, $5, $10 or whatever....investors want an "expert" to offer up an opinion on whether that price is low or high. Why buy an $8 stock if the target price is also $8? Better to buy a stock that's trading for $8 but that is projected to go $20...maybe.
Resverlogix also has analysts offering opinions and price targets:
- Stonegate Capital Partners put out a report in November of 2015 with a target range of $3.54 to $9.34
- Van Leeuwenhoeck Research provided their last update in May of 2016 with a new NPV of $8.50 CAD up from their previous $5.85 opinion:
- Zacks put out the most recent report with a $5.00 CAD valuation target:
- http://www.stonegateinc.com/reports/RVX_NOV_2015.pdf
- http://nebula.wsimg.com/2e68712bb20de1e4d82f91da58ab0b9f?AccessKeyId=F1B3D293B900048B2E3E&disposition=0&alloworigin=1
- http://s1.q4cdn.com/460208960/files/News/2016/July-29-2016_T.RVX_Vandermosten.pdf
My own opinion is predicated on Resverlogix succeeding with its phase III trial, the goal of which is to prove that Apalbetalone can provide Relative Risk Reduction (RRR) for the incidence of Major Adverse Cardiac Events (or MACE defined as heart attack, stroke or death) in patients with Diabetes Mellitus.
The phase III trial is called BETonMACE and it has been running for almost a full year now, however there isn't a specific end date because its an "events based" trial. The results will be evaluated after 250 MAC events with a futility analysis to come after 125 events. A futility analysis is used to determine whether or not a clinical trial should continue or not.
If MAC events are occurring equally in both the Placebo and Apalbetalone arms of the study, then the trial will likely be determined to be futile and stopped. If the treatment is outperforming the placebo, then the trial should reasonably be expected to continue.
The company is blinded to the safety and efficacy results, however a recent PR put out by the company announced that the independent Data Safety Monitoring Board had given a positive recommendation for continuing the trial with no modifications after a completed safety review.
Of course the most obvious question, and one that is perfectly legitimate is this;
If Resverlogix has so much awesome potential, then why is it trading at such a depressed level with a market capitlization of less than $100 million USD?
The answer in my opinion is as obvious as the question, its because of profile, or rather a lack of it. RVX is not a stock on a lot of radar screens. And this pathetic and miserable little blog will do very little to change that. Yes there are some analyst outfits covering the company, but they're small boutique shops that companies pay for exposure. Nobody is ever going to confuse Zacks with BMO or JP Morgan.
Daily volume for RVX.TO trading in Canada is only about 20,000 over the past three months and on the US side where it trades OTC with the symbol RVXCF the trading is even lighter with only about 3,000 shares changing hands on average.
The big boys like the aforementioned JP Morgans and BMO, I highly doubt they have brokers talking up an investment in Resverlogix, and looking at things logically....Why would they? There are plenty of development stage companies engaging investment bankers all the time to underwrite initial and secondary offerings. The major outfits underwriting those offerings and ponying up hundreds of millions, perhaps billions of dollars....those are the stocks that are going to get the buzz, the ones that will be put "in play".
But if the phase III BETonMACE trial succeeds, then I don't think that will matter. In my opinion the market potential for Apalbetalone would be explosive with indications in major diseases like Diabetes, Kidney Disease, Cardio Vascular and Alzheimers. All those conditions are impacted by bad cholesterol which Apalbetalone may alleviate.
It is my view that a successful futility analysis with the company being given the green light to continue through to completion of the trial, that this would be the catalyst that could vault Resverlogix to a market capitlization of at least $1 billion USD, and even that is extremely conservative in my view.
Ultimately though, if the trial succeeds, I don't see Resverlogix taking Apalbetalone to market, I would expect them to be bought out by Big Pharma, as happened recently with Relypsa which sent it from around $14 as recently as May to $32 on the Nasdaq where it traded under the symbol RLYP.
Recent Developments
Resverlogix recently cancelled their Annual General Meeting (AGM) which was scheduled for October 5th, notifying the market via a SEDAR filing. No reason was given for the cancellation so I emailed the company's Investor Relations VP to ask why. A reply came back saying that the meeting date had in fact been "changed", but that no reason could be given because that information is not in the public domain. Here's the text of the email I received:
- Unfortunately, we can not advise to the reason for the change in meeting date as this would be information not in the public domain. When the business to be addressed at the annual meeting has been finalized a Notice of Meeting will be filed with the regulators (www.sedar.com) and ultimately the company will issue a press release regarding the details of the meeting closer to the event date
So obviously something is going on that warranted cancelling the AGM and I am hoping its something positive like another regional deal or a buyout by Big Pharma, but ultimately its all speculation at this point. And even if there is a big deal being worked on that doesn't mean it will be finalized, lots of deals die in the negotiation stage.
But getting back to a stock's valuation, ultimately its about supply and demand. I made lots of Ziopharm shareholders mad last year when I offered up the opinion that the $1 billion + valuation the company had was merely the result of retail investors being herded into the stock by a lot of fluffy news, cheeseball promotion and social media hype.
Its that old line about selling the sizzle not the steak. And there is nothing wrong with frying up a juicy T-Bone and enticing diners with the sound of the meat sizzling. But if they come and sit down and instead of a T-Bone they find a minute steak or hamburger, well they're not gonna stick around too long.
At the end of the day it all comes out in the wash and if a company succeeds then the market will recognize it at some point. If a company doesn't succeed, or if they over promise and under deliver....well the market recognizes that as well which is why you see a lot of high flying heavily pumped stocks get pummelled downward.
If BETonMACE succeeds, in my view the sky is the limit given the diseases being targeted and the potential market. But before that happens they will have to have a successful futility analysis, and with a positive report on that I can see Resverlogix attaining a market cap of $1 billion USD at least while waiting for the full trial completion.
Sizzle is nice, it can get the mouth watering. But you can't eat sizzle.
Keep them comming LEDEN.. Good work!
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