Trevena Inc (TRVN)

[lattices]

I was a lot more nervous today than i anticipated I would be. I'm not confident that I fully understand the other side the of the trade -- the intensity of the selling, particularly after the 4thQ/CC earlier in the week. The price could keep sinking, and I had gone a bit deeper into a position that I intended or particularly wanted, but I was forcing myself to add shares if I couldn't make sense of the other side of the trade -- the sellers.

Today was CARA's chance to report their 4thQ -- and they fell about the same 10%, and for the same apparent reasons. CARA showed 4th Q trial/R&D expenses that were a lot higher than anticipated, and this impacts how much cash the market felt CARA has....the risk of a secondary seemed greater.

Here is a description of why at least one commentator felt CARA fell 10%: https://www.fool.com/investing/2017/03/10/heres-why-shares-of-hopeful-marijuana-stock-cara-t.aspx

Yet, it was the risk of CARA having to do a secondary that had in part prompted me to sell my CARA shares over the past few months (all of them well lower than the current price.) I didn't have immense confidence or understanding of CARA, and I thought CARA would be tempted to do a secondary before their 2nd Q trial data was released. I wasn't sure (and CARA hasn't,) but the risk of it contributed to my feeling safer elsewhere.

My point of this last paragraph is that the cash issues of CARA were clear in advance, other than CARA spending maybe about $10M more than the market expected....the same scenario as TRVN spending about $7M more than the market expected.

Speaking at least from my personal vantage, the news-driven rapid collapse of the price in a non-revenue biotech makes me wonder what everyone else can see, and whether it's better for me just to sell along with everyone else. In moments like that, we're all isolated and alone.

Seeing CARA perform today near identically to TRVN -- a higher cash burn triggering a 10% collapse -- gave me some reassurance that the selling in TRVN was in part motivated by concern about future dilution -- or, more accurately, recognizing a concern that was knowable before the quarterly report.

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The market is right to see dilution ahead for TRVN, but we have our PH3 data -- we no longer are at risk, or have the upside of dramatic trial news. Now it's just a cash calculus -- when and how will the company get more cash.

The international rights for TRVN is worth at least $100M in upfront payments and milestones, and probably somewhat or even a lot more. This is approximately the total ex-cash price of the company right now.

TRVN has had to cope with the market devaluing the pipeline, along with how easy it will be to get acquired/raise capital. it's cut the company's price in half -- or the ex-cash price of the company by over 75%. Once the waves of selling are over, then we can start the slow process of recovery..of investors discovering the new risk-reward.

We've now held the current price against waves of attacks, both the February week when we had data, and then again this week when the market seemed to rediscover the very same anxieties -- or perhaps these sellers felt the company was clearer as to the low future market share reality of its products.

Many of the buyers of the shares over the past month are probably arbitragers, hoping to sell at a slightly higher, post-collapse price. Many of the pre-data shareholders are probably also waiting to sell -- just not so cheaply. The road back will be painful and slow, with big pockets of new sellers each few cents back.

Hopefully we can hold this bottom -- and if we can get back to $4 any time soon, it will indicate that the selling frenzy this week was triggered by information that we already knew. I can see with CARA today and perhaps TRVN earlier this week, some shareholders wait for the quarterly data to make a reliable decision -- quite some number or TRVN shareholders wanted to wait for the quarterly data rather than do their selling after the trial data last month.

Until we can hold post-$3.50 for a few more weeks, I will worry there's a new wave down, perhaps prompted by remaining sellers who either waiting a bit longer for a higher price or the passage of a few more days or weeks, whichever comes first. At least for Wed, Thu and now Friday, $3.5 held, and possibly there are buyers waiting for the falling knife to end.