Its been almost a month since I've written about Resverlogix, which represents a significant holding in my portfolio and is my single largest highly speculative investment. I think that should cover off disclosure, obviously my opinions and thoughts should be considered in that light.
My last posting on Resverlogix was Oct 7th 2017, after RVX.TO had climbed about 24% in one week. At the end of that post I did take note of how the chart indicated an overbought technical situation that, barring some positive news, could very well lead to the stock either stalling or pulling back.
Well, RVX pulled back and is now sitting at $1.30, a support level it was at as far back as June. So far that support is holding, and I am hopeful that the PPS will rebound higher. That however is a hope and far from a prediction. Resverlogix as an investment comports a lot, and I do mean A LOT....a lot of risk.
In reading over my last entry, I have to say I was pretty brutal in my depiction of the company, in particular over corporate communications. I lamented a number of simple and, in my view, incredibly stupid mistakes. I mused about whether they were the result of incompetence or the company being in utter disarray. Or possibly even both.
I have to wonder whether that simple blog post actually had an effect on the company. I had noted that the company had skipped out on two investor presentations, first in Paris and then in NYC. The company gave no notification because, according to my conversation with the VP of IR, the fact that they were posted to the company's website did not constitute "wide dissemination".
How, in this day and age, one could consider that something posted to the World Wide Web is not being widely disseminated is beyond my comprehension. However it seems that the company may have come to that same conclusion as well finally.
They are no longer posting upcoming events on the website, but rather are notifying shareholders and anyone else with News Releases. I don't want to take credit for this change, but I think it would be naive to discount the possibility that this blog might have had an impact.
But enough digressing. The subject line of this entry says there's lots happening, and there is.
On October 13th the company announced an $87 million Private Placement with their second largest shareholder, Chinese Pharmaceutical company Shenzhen Hepalink. Hepalink is probably best known for the sale of Heparin Sodium API both in China and internationally, a blood thinner that is used to prevent blood clots in the veins, arteries and lungs.
This is significant because the company says they plan to use the lions share of the proceeds to retire an outstanding loan that is coming due before the end of the year. If that loan were to be defaulted on it would be disastrous in my opinion because the loan is secured by a standby letter of credit with the company's largest shareholder Eastern Capital. That stand by letter of credit is in turn collateralized by pretty much all the company's intellectual property. In other words, default on the loan and in my view...the company might as well close up shop.
However the loan has yet to receive regulatory approval. In order to be exempt from a requirement for minority shareholder approval the company has requested an exemption based on financial hardship. Whether that exemption will be be granted is something that still represents an unknown.
The next bit of news came out just 11 days later, announcing that Shenzhen Hepalink subsidiary Hepalink U.S.A had paid $8 million for a right of first refusal agreement with respect to the right to manufacture, develop and commercialize products containing Apabetalone until April 15, 2019.
This is significant because, well quite simply the company is, (in my opinion and based on all the publicly available info I can find) in desperate need of capital. They have after all asked for a regulatory exemption based on financial hardship. According to various slide presentations they're burning somewhere between $3 and $4 million each month. $8 million is only enough for two or three months, but it might bridge a gap to a more significant financing deal. As I said almost right off the bat here, Resverlogix has a lot of significant risk factors and I don't like to sugar coat things.
It hasn't even been a month and yet there is still more news. On November 1st, just this past Wednesday, the company announced they had received a 5th positive recommendation from the Data Safety Monitoring Board for their Phase III clinical trial of Apabetalone called BETonMACE.
I view this news as being highly significant. And were it not for the financial constraints and risks, I think this news might otherwise have resulted in a sizable increase in the PPS. Data Safety Monitoring Boards can recommend halting a clinical trial, due to reasons of safety, efficacy or both. That happened with Pfizer's CETP inhibitor Torcetrapib back in 2006:
And finally, the last bit of news that came out this past Thursday November 2nd. The company announced upcoming conferences they are scheduled to attend:
In other words, lots is happening....just not with the share price. Ironically when things were quieter with lots of reason for Fear Uncertainty and Doubt, the PPS was climbing. Now with much more news to chew on, and especially with the 5th positive recommendation from the DSMB, now the PPS is languishing.
As a final note, while that last blog post coincided with the technical picture being overbought and signalling a potential pull back (which did in fact happen), this time around the technical picture is decidedly oversold and signalling a potential climb for the PPS.
Comments welcome.
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