Heat Biologics Inc (NASDAQ:HTBX) hasn’t had a great 2017. The company is down a little over 30% year-to-date and sentiment surrounding its lead development program has taken something of a hit on what amounts to nothing more than a lack of perceived operational advance.
Over the last few weeks, however, things look as though he might be starting to turn around. Back during mid-August, Heat went for as low as $0.47 per share. By September 12, this had topped out at $0.71 a share, a 50% appreciation, and the company now trades for just shy of $0.60 apiece.
So what’s causing the turnaround?
This is a biotechnology company with one of the most promising and exciting programs at this end of the space right now in play. The potential of this program, however, is being largely ignored on the back of (or at least, overshadowed by) expectations for a reverse split near term. Management has already picked up approval for the split and, if it comes into effect, it could bring with it some near-term short side activity.
With that said, however, the split is only necessary to get the company back above the $1 minimum bid threshold as required by NASDAQ. If Heat can push through this threshold organically, i.e. if the company can raise its own share price through – presumably – operational advance, the reverse split will be unnecessary.
So why is this important? Well, it means that the impact of any catalyst that gets the company running is sort of compounded by the increased proximity to the $1 mark. To put another way, if the company reports some positive news and the stock starts to run to the upside, markets see this run and associated with a reduced risk of a reverse split, because open market price is nearing the minimum bid threshold.
And that’s what we have seen recently.
The company’s lead development program is rooted in combining its own proprietary asset, a drug called HS-110, with Bristol-Myers Squibb Co (NYSE:BMY)’s Opdivo, in a non-small cell lung cancer (NSCLC) indication. There is a phase 2 trial ongoing right now and data to date has proven incredibly promising. If the outcome of the trial points towards efficacy, Heat will move into a phase 3 pivotal investigation that could serve to underpin a registration application in this indication.
On September 12, management announced that it had secured a type C meeting with the FDA to discuss the registrational pathway for the drug in question, as used in combination with the above-mentioned Opdivo.
This sort of meeting gives a company the opportunity to get some real insight into what the FDA is going to require from a new drug application (NDA) and, in turn, the outcome of the meeting can be a real catalyst for a company this end of the space. Especially, that is, if the outcome points towards a pathway that the drug in question has either already successfully traversed (say, for example, as part of a smaller scale trial) or if it points towards a similar pathway that markets feel shouldn’t bring with it any significant hurdles.
Going forward, then, that’s what we are looking for from Heat as a next major catalyst – the outcome of the type C meeting. Normally these meetings take place within 75 days of application, and we can assume that the company applied for the meeting at some point within the last month or so. This means we should see the meeting take place during the early fourth quarter at the outside.
And remember to keep in mind that the closer this one gets to one dollar, the quicker it’s going to accelerate towards that threshold.
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Image courtesy of The U.S. Food and Drug Administration via Flickr
Disclosure: We have no position in HTBX and have not been compensated for this article.