Notes on Seeking Alpha:
“The company notes 30,266,373 shares outstanding as of Feb. 13, 2019, corresponding to a market cap of $55.39M (assuming a price of $1.83). A recently filed prospectus notes RLMD stockholders plan to sell up to 28,895,389 shares worth of RLMD stock and warrants, 17,796,411 shares of that is common stock already held by the selling shareholders (RLMD won't receive any proceeds from the sale of that) (- he’s wrong about this, it’s simply a registration of the private placement we invested in back in October. The stock is now fully registered and could be sold by the individual shareholders, it’s not a ‘planned sale’) but another 11M shares worth of warrants are outstanding, the exercise of which would result in proceeds to RLMD. To be clear, the exercise of these warrants would cause dilution. If all of them were exercised, the shares outstanding would go from 30.3M to 41.4M.
Alternatively, investors/traders might feel that even if RLMD broadens its pipeline due to freshly raised cash, that a negative readout from the phase 2a of D-methadone in MDD might hit the stock very hard regardless. The aim then would be to buy into the recent run-up, knowing more investors might begin to take a position ahead of results and Nasdaq listing, thus facilitating a further run-up, but not hold through results. I view this as the most viable strategy, I think RLMD runs up further from current levels because D-methadone looks to be the closest drug to (es)ketamine that has been developed for awhile.
(I’d rather sell enough to recover my investment and let the rest ride thru the test result announcement)
With VTGN the concerns about cash are gone for now, although future dilution always is a risk. The recent failure of rapastinel really has more of a read through to AV-101 than it does RLMD's D-methadone and so VTGN seems risky heading into results. Notably VTGN's first results will come from a 20 patient study in depression with an efficacy endpoint as the primary endpoint. That's asking for trouble. The result of that study is a complete gamble. It should be pretty hard to beat placebo in a 20 patient study even with a crossover design. A few more than usual placebo responses might throw off the whole trial. Coversely, a few lucky responses in the AV-101 arm could see the drug succeed. That's what makes it such a gamble. The time to enter VTGN might be after Q2'19 for those who believe ELEVATE will succeed.
Some risks worth noting (not an all inclusive list) are that any long in RLMD and VTGN is exposed to the major risk of failure in clinical trials causing the stock to tank. Delays in the announcement of clinical trials results also can cause a biotech stock to sell off. Further, both of these stocks have market caps under $100M. VTGN at least trades on the Nasdaq, RLMD is still on an OTC exchange.
( hopefully will be uplisted to NASDAQ soon)
I encourage investors to check out intra-day charts of either stock to see that liquidity is not ideal for either name, there are lots of apparent gaps up and down simply due to periods where all trades executed were at a single price or no trades were executed. Poor liquidity can be associated with failing to get the desired entry or exit in a stock as well as issues opening or closing a position of a given size as quickly as desired.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.”
