The theme around here continues on -- Reneo Pharmaceuticals (RPHM) (~$45MM market cap) is another broken biotech, this week the company announced their Phase 2 study of Mavodelpar in adult patients with mitochondrial myopathies did not meet its primary or secondary efficacy endpoints. The stock responded by crashing 80+% as this is a one shot on goal biotech without much of a remaining pipeline. Reneo is now trading well below liquidation value, while the company has yet to announce a strategic review, it doesn't have many options left, I would expect the official strategic alternatives declaration soon.
I could see a little bump in price if and when the company does formally announce strategic alternatives and then a second on some conclusion, whether a deal or liquidation of Reneo.
Disclosure: I own shares of RPHM
What do you suggest we do? Is it a good time to buy or are prices going to stay pretty low?
ReplyDeleteAlso interesting is that, as with CYT, Novo was a holder. I don't quite understand what they are doing: with CYT it appeared like they were interested in selling down a bit when the trial disappointed. In this case they sold their entire position yesterday < $1.20. That seems .. Overly aggressive? Not quite sure what to make of that. I'm curious to see whether these shares ended up at mr. Tang, mr. Leonard or another one of the usual suspects. This seems like a nice clean name for some activists to try and do something.
ReplyDeleteYeah, was about to flag the same thing. Probably easier for them to just get out clean then wait for any liquidation. However would that make things harder for a Tang or other who could buy a few % and have Novo on board ?
DeleteThe corporate structure seems a bit less shareholder friendly than typical (staggered board, requirements for calling a meeting type stuff), hopefully that doesn't deter the typical activists. Hopefully the international entity (19 of 48 employees were in UK as of the last annual report) doesn't complicate or slow whatever reverse merger/liquidation outcome they pursue (see SIOX liquidation delays). Low turnout for their last annual meeting not ideal. Always humbling to see what looks like cool science that is going to change a lot of lives fail in the clinic for unknown reasons.
DeleteSo is it a good time to buy?
ReplyDeleteI own shares, but up to you to determine if you agree.
DeleteFYI: "After the holidays, there will be a board meeting in which a pathway forward will be decided. Thereafter, we will provide an update to the market."
ReplyDeleteRunner a screener for stocks that have dropped >50% before every market open would be a productive thing to do. As they often overshoot downwards right after news comes out. Would be sitting on a nice 2 day 40% gain in this case. Similar thing for ACRS.
ReplyDeleteHow did you come up with the $2.5mm in severance?
ReplyDeletehttps://www.sec.gov/ix?doc=/Archives/edgar/data/1637715/000119312523295039/d553352d8k.htm
DeleteIt's in the 8-K
Are there news resources for biotech other than biospace.com/ that are good to follow?
ReplyDeleteshouldn't we factor in shutdown costs for ph. 3 trial 200 patients & other shutdown costs?
ReplyDeleteAlso how did you arrive at only $15M burn to deal? aren't there public company costs? Thanks
A more constructive approach could be to give some numbers yourself. What’s is your estimate of costs of shutting down that trial? $5m? $10m? And for public company costs? I think that MDC is assuming 3 quarters of $5m / quarter, which seems reasonably in line with similar companies.
DeleteI’m a bit lower myself too, reserving something like $5m - $10m in extra costs / unforeseen liabilities. But I think it is likely that somebody like Kevin Tang can make this work buying all shares at $2; $1.80 or something like that.
Thanks, yeah just an estimate swag based on experience. Feel free to make your own assumptions.
DeleteNice call on the $1.80/share number. Tang's offering just that:
Deletehttps://www.sec.gov/Archives/edgar/data/1191935/000121465923016861/o1226230sc13d.htm
that was quick
ReplyDeleteBoom! Happy holidays!
ReplyDeleteActually 1.62 still is a good price, considering Reneo most definetly will liquidate
ReplyDeleteI'm worried on the timing, this was almost too quick of an offer from Tang. The board will still have to do a more complete review of alternatives, see what other options/offers are out there, I wouldn't expect them to make a quick decision here.
DeleteWell if another quarter of cashburn, buyers might step away I fear. I am clueless whether the hold through or not at those prices
DeleteI am in the same boat and considering just closing the position. All in all good return given timing …
DeleteAny thoughts on CHRS?
ReplyDeleteWhat's the trade ?
DeleteBased on recent FDA approval, was curious if it was still at a reasonable value.
DeleteOthers might have thoughts, but sorry, that's outside my lane.
DeleteWill the NAV decrease by the end of Q1 this year due to cash burn or other liabilities therefore bringing it inline with current $1.60 price? (Not taking into account the $1.80 offer)
ReplyDeleteNo, I think it would still be mostly inline with what I put up there, but if it drags out longer, maybe it would come down some. I don't think they're going to quickly accept Tang's offer, especially since they haven't declared strategic alternatives yet, board needs to canvas the market a bit first to CYA.
DeleteAlso, the bid is contingent upon a hefty $75m cash balance. Net cash minus severance costs is already $82m, doesn't leave that much room for error. I don't think at all that this bid is a certainty.
DeleteTotal cash isn't $100M, it's "over $100M". They had $125M in total cash end of Q3, minus $19M in cash burn (same as Q3) would give them a balance of $106M right now. Minus liabilities, the vTv stock repurchase, and severance would make net cash $84M. And that's $2.50/share, so why would they take the low Tang offer when they could liquidate for close to that?
DeleteBML in now too, will also push for a quick resolution
ReplyDeleteThanks for pointing that out. ACRS is in a similar spot, both are on the shareholder registry there too.
DeleteHi MDC/ All - Took a quick look at ACRS too, given BML just bought 4.5m shares. In the PR on Jan 16th the new CEO (co-founder) announced that the co. is conducting a strategic review of its business to determine how to optimally deploy its capital to maximize shareholder return, noted the cash balance at 12.31 - but also "reiterated" the business pan & highlighted the 3 programmes. I'm wondering which statement deserves more weight here? Perhaps neither... Is the fact that they highlighted the cash balance a give away, or the norm in your experience? Would welcome any thoughts/guidance here. Cheers.
DeleteThat's pretty much the exact risks I put in my draft post. They haven't fully given up yet by the sounds of it, close, but not quite. Hoping that Tang/BML can push them over the edge or lob in a bid to force them to, but that's a little riskier than some of the others that have fully halted development.
DeleteThanks MDC, appreciate the response! (draft post, looking forward to it:) ). Wonder if this will drift lower while Tang & BML push behind closed doors.
DeleteCorrect me if I'm wrong here, but from what I can tell BML filed a 13G (not D) so would not be able to "speed things up". That said, I guess they could flip to a D pretty quick.
ReplyDeletehttps://www.sec.gov/ixviewer/ix.html?doc=/Archives/edgar/data/1637715/000095017024019338/rphm-20240220.htm
ReplyDeleteReneo with an additional workforce reduction.