ContraVir Pharmaceuticals, Inc. (CTRV), the biopharmaceutical company, recently presented data demonstrating the synergistic antiviral activity by two drug candidates for treatment of hepatitis B viral (HBV) infection. This news created such expectation in the investment community and the financial forums that the company could successfully close an underwritten public offering. In this piece, we will provide some information about this offering and its price reaction as well as some information about the products.
Drug Candidates
The company has three candidates: TXL, Valnivudine, and CRV431. TXL is an oral drug made of tenofovir. It is considered a product, which “is developed to improve the characteristics of drugs, like better efficacy, lower pill burden, improved safety…“. This drug is in a Phase 2a proof concept study. The company licensed TXL from Chimerix in exchange of 120,000 preferred shares valued at $1.2 million in 2014. During September 2016, the seller decided to convert them and obtained $1.0 million shares. We appreciate this decision since Chimerix, with deep knowledge of the candidate, still believes in the future of the product.
Tenofovir disoproxil
CRV431 is a drug candidate under development for the treatment of HBV infection. The company acquired the drug through a merger with Ciclofilin Pharmaceuticals Inc. The product targets enzymes called “cyclophilins” that play a key role in the HBV life cycle. Additionally, the other candidate, Valnivudine, which is an oral drug for the treatment of herpes zoster, has completed the phase 2 already and is waiting for the next and last trial with the FDA.
Recent Developments
The most recent development was announced on April 22, 2017. The company presented data demonstrating the synergistic antiviral activity of the two products, TXL and CRV431, at The International Liver Congress® 2017; the annual meeting of the European Association for the Study of the Liver (EASL) in Amsterdam, The Netherlands. Robert Foster, ContraVir’s Chief Scientific Officer, stated the following in the congress:
“The two EASL posters support ContraVir’s strategy of combining two drug candidates with distinct and complementary modes of action, an approach that may halt or slow the progression of chronic hepatitis B virus. We are especially gratified to be included in one of the EASL poster tours, as the selection reflects the EASL Scientific Programme Committee’s recognition of CRV431 as an antiviral compound with a promising clinical profile and a novel mode of action.” Source This news seems to be very important for the company as just two days later, it could announce a public offering of securities. The book-running manager was Canaccord Genuity Inc., and the offering was closed very rapidly.
” ContraVir is offering 12,000,000 shares of its common stock and warrants to purchase 6,000,000 shares of its common stock at a combined offering price of $1.00. All the shares and warrants are being offered by ContraVir. The warrants will be exercisable for a period of five years from the issuance date at an exercise price of $1.25 per share.” Source The demand for the stock seems to be high because the offering was rapidly closed. This is very positive. In addition, the share price did not fall, while the book-runner was working on the sale. The share price maintained the price level of $0.8 before and after the closing of the offering. Thus, investors seem to like the stock and believe on the commercialization of its candidates.
Institutional holders
We appreciated finding the following respected funds among the shareholders:
Holder Shares Date Reported % Out Value Vanguard Group, Inc. (The) 1,858,649 Dec 30, 2016 3.10% 2,230,378 HighTower Advisors, LLC 1,047,731 Dec 30, 2016 1.75% 1,257,277 TIAA-CREF Investment Management, LLC 724,455 Dec 30, 2016 1.21% 869,346 Geode Capital Management, LLC 346,720 Dec 30, 2016 0.58% 416,064 Teachers Advisors, Inc. 298,781 Dec 30, 2016 0.50% 358,537 Morgan Stanley 277,679 Dec 30, 2016 0.46% 333,214 JP Morgan Chase & Company 200,000 Dec 30, 2016 0.33% 240,000 Source
We identified several major brokers such as JP Morgan, Morgan Stanley as well as some hedge funds and mutual funds like Vanguard, HighTower, TIAA-CREF, Geode and Teachers Advisors. The fact that the big boys invested in this company means that the company passed the due diligence of the funds and its managers believe that the company offers an interesting risk-reward ratio. Our subscribers know it very well since we always say it in internal mails: always follow the big firms!
In this case, we also saw that insiders bought at prices above the current share price. This is very positive because if we buy now, we may be hitting a price close to bottom:
Insider Transaction Type Value Date Shares SAPIRSTEIN JAMES
Option Exercise at $1.50 per share. Direct 24,999 Oct 27, 2016 16,666 CERRONE GABRIEL
Statement of Ownership Direct Aug 17, 2016 78,146 CERRONE GABRIEL
Statement of Ownership Indirect Aug 17, 2016 5,105,433 SULLIVAN-BOLYAI JOHN Z
Statement of Ownership Direct Mar 2, 2016 21,000 SAPIRSTEIN JAMES
Purchase at $1 per share. Direct 10,000 Feb 18, 2016 10,000 SAPIRSTEIN JAMES
Purchase at $2.15 – $2.15 per share. Direct 1,075 Nov 30, 2015 500 SAPIRSTEIN JAMES
Purchase at $1.64 – $1.64 per share. Direct 4,100 Nov 23, 2015 2,500 Source
Conclusion
CTRV is achieving new milestones in the development of its three candidate drugs. It is true that the company’s share price lost some value in the process due to share dilution, but the company is still able to obtain funds from investors with new offerings. In our opinion, some of its candidates are close to Phase 3, so the time will come soon if the drugs can be commercialized. If the trials are positive, the shareholders who believed in the company, will make interesting returns thanks to their patience. Finally, the fact that some of these patient shareholders are insiders and institutional money manager is definitely a good sign. To sum up, the company is sending good messages to the investment community, thus we encourage investors to stay alert.
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