Tenax Therapeutics Inc (NASDAQ:TENX) is a North Carolina-based biotechnology company focusing on the development of treatments for what is called the critical care market – a subsection of medical care for patients whose illness requires close, constant watch by a team of specially trained caregivers. The company has had a rough five years. Back at the beginning of 2012, Tenax traded for more than $60 a share. It currently trades for less than two dollars a share – a 97% decline across the period. In the last week alone, the company has lost nearly 30% of its market cap. This latest decline comes despite a very near-term catalyst; one that could spark some upside momentum into the company and – to a certain degree at least – get things back on track.

We think this might be an opportunity to pick up an exposure to a beaten-down stock ahead of a major catalyst. Here is why.

Tenax is currently developing a treatment for what is called levosimendan. The drug is currently under investigation to determine its efficacy in the reduction of the incidence of morbidity and mortality in cardiac surgery patients at risk of what’s called low cardiac output syndrome (LCOS) when administered before and during cardiopulmonary bypass. LCOS is a clinical condition that is caused by a transient decrease in systemic perfusion (which is the process through which our bodies deliver blood to a capillary bed) secondary to myocardial dysfunction. The outcome is an imbalance between oxygen delivery and oxygen consumption at the cellular level which leads to metabolic acidosis (as it sounds, too much acid in the blood).

Right now, there no pharmacologic therapies approved for management or prevention of post-cardiotomy LCOS, making it a major unmet need. The drug is already approved outside of the US in an Acute Decompensated Heart Failure indication, and has been prescribed to more than a million patients over the last 15 years or so.

This international approval is important, because it points to the fact that the drug is widely regarded as safe, and that – by proxy – there shouldn’t be any tolerability concerns when the company puts forward its new drug application (NDA) to the FDA in this indication.

So what is the catalyst?

Throughout 2016, Tenax conducted a phase 3 trial called LEVO-CTS, in an attempt to demonstrate the drug’s efficacy in the above discussed indication. The trial enrolled a total of 880 patients, and completed enrollment towards the end of last year. Topline results, relating to the primary endpoint of the study were reported by the company as slated to hit press before the end of January this year. We are now closing in on the end of the final full week of the month, leaving just a couple of days at the start of next week remaining for the company to meet its January target.

By way of a brief outline of the study, it is a double-blind, randomized, placebo-controlled study evaluating the use of levosimendan administered before and during cardiac surgery to reduce the incidence of LCOS and associated morbidity and mortality. It’s also looking at a host of secondary endpoints, primarily rooted in the drug’s potential pharmacoeconomic benefits and the incidence rate of LCOS.

A couple of things are worth noting here.

First, we expect that the decline seen over the last week (and especially based on the fact that it has accelerated over the last couple of days) is indicative of markets expecting Tenax to miss its target January release timeframe. The miss is resulting in a bit of a sell off, and impacting sentiment. Second, that – for us, at least – if the company misses its target by a few days or week or so, it’s not that big a deal. This trial has been a bit of a roller coaster, and that the topline report is set to hit press even near term is a positive.

So what are we looking for?

We are watching closely for any indication from the company that it is about to put out topline data. The first couple of days of next week are still open for the company to meet its January target, and if we do see numbers hit press, and – in turn – they are positive, we expect some sharp upside.