Cesca Therapeutics Inc (NASDAQ:KOOL) sentiments on Wall Street have turned from bad to worse.
The stock is closing in on its 52-week low as short sellers remain in full control.
The drop comes as a surprise, given that the stock was up by as much as 301% as early as October.
However, the stock is still up for the year by more than 10%. The big question now is whether the stock will erase all this year’s gains, as it continues to drop.
Cesca Therapeutics Business
Cesca Therapeutics is a clinical-stage biotechnology company focused on the development of cellular therapies and delivery systems. The company develops and manufactures automated blood and bone marrow processing systems that enable the separation, processing, and preservation of cell and tissue therapy products.
The company also develops and commercializes autologous cell-based therapeutics for use in regenerative medicine.
Cesca Therapeutics hit a new 52-week high of $6.44 after the U.S Patent and Trademark Office granted it a Notice of Allowance pending patent application for a cell separation technology. The Company plans to patent the Buoyancy-Activated Cell Separation (X-BACS) technology that is designed to separate important target cells from blood, bone marrow as well as other cell sources.
If approved, it will become the company’s second patent for the X-BACS technology. The Chief Executive Officer, Chis Xu, expects the new patent to strengthen the company’s Intellectual Property portfolio as they continue to advance the CAR-TXpress solution,
“CAR-T represents the future of cancer treatment, yet we believe speed, cost and consistency will likely emerge as significant industry challenges. With the X-BACS technology embedded in CAR-TXpress, manufacturers will be able to improve the yield and consistency of CAR-T cells in less time and at a lower cost,” said Mr. Xu
Investors pushed the stock up on the fact that X-BACs technology which is key to CAR-TXpress has the potential to address unique needs of a broad range of potential partners. The company remains well positioned to target CAR-T manufacturers, medical device companies as well as distributors and academic institutions with the technology
The technology also allows the company to achieve industry-leading levels when it comes to targeting cell recovery and viability, relative to competing for cellular processing systems.
Analysts at Vanguard have initiated coverage of the stock with a ‘sell’ rating, a downgrade from an initial rating of a ‘Hold.’ The downgrade appears to have been triggered by the stock’s recent underperformance that has seen it shed more than 50% in the market since October. With the stock showing, no signs of bouncing back, things are starting to turn south even though it is still up for the year. The stock has been assigned an average broker rating of 3 out of 5 which represents a consensus ‘hold’ rating.
The clinical stage biotechnology came under pressure after announcing the pricing of a $2.7 million public offering that did not go well with investors. Cesca Therapeutics Inc. (NASDAQ:KOOL) has registered a public offering of up to 900,000 shares of its common stock, priced at $3 a share. The offering could more than double the amount of money that the company had as of the end of September.
The pricing of the offering at $3 spooked investors given that it represented a steep discount to the price the stock was trading at, at the time. Another point of concern it investors is that in addition to sinking the company to further debt the offering will lead to dilution of the stock.
Cesca Therapeutics intends to use net proceeds from the offering for general and corporate purposes and for working capital.
In addition to the public offering, Cesca Therapeutics reported a net loss of (-$2.4) million for the three months ended September 30, 2017. Net revenue in the quarter dropped to $3.1 million from $3.8 million reported in 3Q2016. The company attributes the decline to a one-time shipment of inventory associated with a discontinued product line.
Gross profit in the quarter dropped to $931,000 or 30.3% of net revenue from $1.4 million for the comparable period last year.
In defense of the third quarter financial results, the Chief executive Officer maintains that the quarter marked an important period on the company’s growth trajectory. According to the executive, the approval of the first CAR-T therapies marked a paradigm shift in the treatment of cancer. The company also successfully trimmed its net loss in the quarter from (-$22.4) million reported last year to $2.4 million.
“Once commercialized, Cesca’s novel, CAR-TXpress™ solution is expected to provide developers with drastically reduced cell processing times, thereby allowing greater numbers of patients to be treated with existing cell processing infrastructure,” said MR. Xu.
Cesca Therapeutics is currently pursuing collaborations and potential development partners to help advance its CAR-T therapies.
Cesca Therapeutics Inc. (NASDAQ:KOOL) could remain under pressure heading into the year-end, because it is yet to generate any profits this year. However, the stock could receive a major boost on the company achieving key milestones on the development of its X-BACS technology.
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Disclosure: We have no position in KOOL and have not been compensated for this article.