We’ve had a big start to the week in biotech, as a number of companies pick up trading after the Thanksgiving break in the US, and this resuming has translated to some pretty heavy volume action at both ends of the sector. Here are three companies that closed out last week on a sharp move, and that have opened this fresh week with some heavy volume, alongside a look at what’s behind the attention for each.
The three companies in question are Heat Biologics Inc (NASDAQ:HTBX) and Sunshine Heart Inc (NASDAQ:SSH).
So, to kick things off, Heat.
This one is a speculative data driven move. The company is up 100% since the middle of last week, and volume (and the driver behind the gains) suggests it’s set for further gains before this week draws to a close. Why? Because the company announced a couple of weeks ago that it will present data from its lead lung cancer trial at the International Society for the Study of Lung Cancer Annual Meeting. This, in addition to the announcement a day earlier, that on November 30, the company will report data from a phase II trial in bladder cancer at the Society of Urological Oncology Annual Meeting. Both presentations are top line, and if they come in in line with market expectations, they will underpin a pivotal trial in the respective indications.
The upside potential on the actual topline release remains unclear at this point. As a general rule, companies don’t tend to announce their intentions to present poor data at a major meeting (and in both lung cancer and bladder cancer these meetings are some of the hottest on the calendar) but that doesn’t necessarily suggest the topline will be groundbreaking. There have been many instances of sell the fact on these sorts of events, and there’s the risk that the gains seen over the recent weeks might turn out to be representative of this pattern.
We’ll see. Whatever happens, we’ll be watching the numbers closely when they hit.
So, moving on, let’s look at Sunshine.
This one’s a little less operationally driven, but of note nonetheless. On November 21, the company receieved a note from NASDAQ that it had served up an extension on the timeframe within which it has to regain compliance with the exchange’s minimum listing rules. The NASDAQ Capital Market has a $1 minimum bid rule, and if a company’s PPS drops below this price for a predefined period, it falls out of favor with the exchange’s listing requirements. The first step is generally a 180-day period within which to gain compliance, and then if not met, a second 180-day period is generally set. The standard get out of jail free card is a reverse split, which will generally work to boost price above min-bid, but it’s far from a favorable action when it comes to shareholder perception, and so if there’s any way to avoid it most management teams will do so.
Adding to the complexity of the situation, Sunshine also has to regain compliance on a different element of the rules – a $2.5 million minimum stockholders’ equity requirement. Under the new terms outlined by NASDAQ, the company has until January 30, 2017 to satisfy the bid requirement (10 days consecutive above-bid trading is the rule) and until March 20, 2017 to meet the equity requirement.
With the extension, Sunshine has seen a close to 40% gain in market cap, on expectations that it should be able to meet he requirements for continued listing without having to seriously impact capital structure. Nothing’s confirmed, of course, but shareholders have welcomed the breathing room.
Call us pessimists, but we still expect a split before the min bid comply-by date.