RMi’s closing bell analysis: STEM’s failure highlights the fragility of sector, learn the lessons from …

May 31, 2016 5:50pm

... Management miscues, 12 for 1 reverse split, toxic financings, excesses and dependence on capital market access

Pre-market indications – 3 hits and 1 miss

Out and about: NYSEMKT: AST, BSTG, NYSEMKT: BTX CAPR, CYTX and CUR

Earnings: QURE

Do you care what happened today, you should … because it has implications to Wednesday's sector activity?  

Read it today, you might not have access tomorrow!

There are two things that investors need - interpretation of news and translation of related market metrics concerning the stem, cell and gene therapy and regenerative medicine sector to substantiate share pricing.

U.S. stocks closed mixed Tuesday, the last trading day of May, as investors eyed economic reports for indications on the timing of the next rate hike.

The NASDAQ closed UP +14.55 or +0.29% to 4,948.06 and the DOW closed DOWN -86.09 or -0.48% to 17,787.13.

A day in the life of the stem, cell and gene therapy RegMed (SCGT & RM) sector – the advance/decline line scenario of our 43 covered companies.   

• Opened barely positive with an A/DL of 22/19 and 2 flats;

• The mid-day stayed positive  with an A/DL of 26/16 with 1 flat;

• The closing bell was negative  with A/DL of 18/20 with 5 flats

Henry’omics:

U.S. markets were closed Monday for Memorial Day.

• As of Friday's close, the Dow was up about half a percent for the month, tracking for its first four-month win streak since 2014. The S&P 500 was up 1.6% for May, on pace for its first three-month win streak since 2014.

Sector stocks opened positive, stayed positive at the mid-day and closed positive.

• StemCells’ (STEM) decline and the try for an orderly shutdown closed a sad chapter of excesses. But, it also speaks to “our” universe and its dependence on multiple shots on P2 goals and capital market access that haven’t taken advantage of probabilities.

Could it be synonymous with an old world bible parable …?

• The Raising of Lazarus mentioned only in the Gospel of John (John 11:1-44), is a miracle of Jesus in which Jesus brings Lazarus of Bethany back to life four days after his burial.
• The issue of the story was that Lazarus’s death was unlikely to have occurred.
• There are too many companies on the edges of death, whether they know it or not or just won’t or don’t face the facts!

So, who will raise the “walking dead”?

Pre-market indications – 3 hits and 1 miss

• Asterias Biotherapeutics Inc. (NYSEMKT: AST) closed DOWN -$0.28 – hit;
• bluebird bio (BLUE) closed UP +$1.10 – miss;
• Osiris (OSIR) closed DOWN -$0.66 – hit;
• Spark Therapeutics (ONCE) closed DOWN -$0.3 – hit;

Out and about:

Asterias Biosciences (NYSEMKT: AST) closed down -$0.28 to $3.14 after their financing of $16.2 M …

• The issue is R&D expenses were $6.3 M with G&A expenses ringing the till at an additional $6.3 M for Q1. Net cash used in operating activities was $4.2 M. The cash “life” is how many Qs long?

Biostage (BSTG) closed FLAT at $1.41 on 163,800 share volume …

• The past 11 session’s struggle post the “At-the-Market” unit financing at $1.7625 has to be reviewed in relation to the total shares traded each day which needs to be divided by 2, the sell and the buy! New financing of $4.5 M extends the runway until Q1/17.

Capricor (CAPR) closed down -$0.23 to $3.01 …

• Another financing is needed after the “pass the hat” of current investors that raked in $4.1 M and may7be some CIRM monies <$3.4 M> still brings its runway to Q1/17.

Cytori (CYTX) closed down -$0.14 to $2.82 …

• CYTX affected a 1:15 reverse stock split as announced on May 10, 2016. Cytori spent approximately $5.1 M in the first quarter 2016. Cytori ended the first quarter of 2016 with $9.4 M of cash and cash equivalents and debt of $17.6 M. Guidance was operating cash burn within a range of $18 M to $20 M with total revenues (product and contract) within a range of $12 M to $14 M. CYTX has a rights offering in the works, each right entitles the holder to purchase one unit at the subscription price of $2.90 per unit, composed of one share of common stock and 0.5 of a warrant, with each whole warrant exercisable to purchase one share of common stock at an exercise price of $3.48 per share for 30 months from the date of issuance. The runway is questionable …

BioTime (NYSEMKT: BTX) closed down -$0.02 to $2.86 …

• BTX last Q, showed R&D spending at $13.73 M, SG&A at $11.87 M but, revenues of $2.M while cash and cash equivalents totaled $27.1 M as of 3/31/16 and they increased spending.
• Another stem cell company whose runway needs an extension!

Neuralstem (CUR) closed down -$0.008 to $0.335 …

• CUR is also in the process of a reorganization “to further realign business with strategic intent” to efficiently allocate resources. The corporate reorganization includes a workforce reduction across all divisions that will result in significantly lower operating expenses. CUR also hopes to sell 2,700,000 at $0.40 shares of its common stock and warrants in a private placement. CUR estimates that it will incur aggregate expenses of approximately $750,000 consisting of cash payments of $700,000 for severance payments, expenses related to the closing of facilities and contingencies, and charges of $50,000 related to the vesting of options and extension of exercise periods of such options. And the runway is … what?

Each day, I will outline the “status” of another 6 stem cell and cell therapy companies!

Earnings:

uniQure (QURE) closed UP +$1.56 to $13.55 …

UniQure NV (QURE) on Tuesday reported a loss of $22.7 M or $0.92.The results missed “Street” expectations of $0.82 per share. QURE posted revenue of $4.3 M in Q1, beating “Street” forecasts of $2.9 M.  QURE shares have decreased 28% since 1/1/16. The stock has fallen 59% in the last 12 months.

As of 3/31/16, QURE held cash and cash equivalents of EURO184.6 million, compared with of EURO203.5 million, as of December 31, 2015, a decrease of EURO18.9 million. The decrease includes EURO16.0 million of cash used in operating, investing and financing activities during the three months ended March 31, 2016, in addition to a EURO2.9 million loss related to foreign currency effects on U.S. dollar-denominated deposits.

On 5/6/16, QURE executed a second amended and restated loan agreement with Hercules Technology Growth Capital, Inc. (Hercules). The loan agreement includes a total commitment from Hercules of up to $40 M, of which $20 M is currently outstanding.

Today’s Bottom Line:

The sector is holding-up quite well as the reverberations of StemCell’s failure will stimulate questions of who is next or close to “biting the bullet”!

• How many companies are operating with barely a year’s cash in their pocket? The issue is there might be money available but, at what cost of a raise 7%, 50% to 100% warrant coverage if they’re registered and tails that preclude any other I-Banker from cleaning up the balance sheet!

Review my fear gauge or the CBOE Volatility Index (VIX):

• Tuesday traded above 14;
• Monday was a holiday;
• Friday traded near 13.3;
• Thursday traded near 13.8;
• Wednesday traded near 13.8;
• Last, Tuesday traded below 15;

Most active sector stocks + and -:

• StemCells (STEM) -81.19%;
• Cesca Therapeutics (KOOL) -14.71%;
• Osiris (OSIR) -11.73%;
• Asterias Biosciences (NYSEMKT: AST) -8.19%;
• Histogenics (HSGX) -8%;

Versus …

• uniQure (QURE) +12.97%;
• ImmunoCellular (NYSEMKT: IMUC) +10.60%
• Fibrocell (FCSC) +8.45%
• Stemline (STML) +6.53%;
• Kite Pharma (KITE) +7.24%

Opinions expressed are those of the author and are subject to change, and not intended to be a forecast of future events, a guarantee of future results, nor investment advice.

Whether information or intelligence is good, bad or somewhere in between; I put into context what is relevant and useful for investors.  All investments are subject to risks. Investors should consider investment objectives.

Henry McCusker, the editor and publisher of RegMed Investors does not hold or have positions in securities referred to in this publication.