OWC Pharmaceutical Research Corp (OTCMKTS:OWCP) is proving to be a pretty tough stock to get a read on right now. The company is one that we have highlighted on a number of occasions over the last six months and each time we have, suggested that – longer-term – there is plenty of room for upside revaluation. This thesis is rooted in the potential of its medical marijuana assets, both in terms of how they might impact the large target populations in question and how they could draw benefit from the expansion of the space as a whole against the backdrop of industry growth in the US.
While we keep highlighting the long-term potential, however, shorter-term, the company continues to drop. Back in February, the company hit highs of $2.70 a share. At last close, it was trading for $0.48 a share.
With that said, however, current price still represents a 172% premium on its 2017 open and a more than 2400% premium over the last 12 months. As such, there are a couple of ways to look at what’s going on. The first takes the last three months into consideration and paints this one is a losing play. The second looks at the company against a backdrop of long-term action, and in line with longer-term potential, and that for us, at least – sets this company up as a potentially highly rewarding play heading into the latter half of this year and beyond into 2018.
The most recent bounce, which saw the company gain more than 15% during the session on Wednesday, came on the back of an announcement detailing intellectual-property activity in Europe. Specifically, the company has filed a provisional patent application in the region designed to protect the mechanisms of action that underpin its lead development asset – a cannabis-based psoriasis cream. This is not game-changing news and – normally – wouldn’t bring about such a degree of revaluation. That it has, however, demonstrates that there is plenty of speculative volume looking for an excuse to get into this one, reinforcing our long-term thesis.
So, if the latest bump proves to be just that, and OWC once again reverses to the downside, what’s going to finally get this one turned around and reverse the overarching bearish momentum in the stock?
Well, as we covered last time, this company is conducting a study investigating the safety and efficacy of the above-noted psoriasis asset right now. This study was initially slated for completion during July, but a look at the protocol at clinicaltrials.org suggests there has been relatively little in terms of advance on the enrollment front, meaning it looks like there is some form of delay in getting the trial completed.
This is a little bit disappointing, as it means we’re going to have to wait a bit longer for the data but, when it hits and assuming it is positive (this is a reasonable assumption given that there is already early-stage data suggesting this is the case), there is a good chance it will be enough to turn the ship around.
Of course, the question of how long this data will take to hit press is pertinent primarily because the longer it takes, the more cash this company has to spend to meet operational expenses. At the end of March, cash on hand came in at a little over $2 million. Chances are, then, that we are going to see a near-term raise to fund the ongoing investigations and – as a result – some degree of dilution on any early-stage positions.
So long as data hits press as positive eventually, however (and when we say eventually, we mean at some point between now and the end of the first quarter 2018), one modest raise should be enough to fund through to the major catalyst and negates any potential further dilution before this one starts to run.
Catch up on the whole story: check out our previous coverage here.
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Image courtesy of Psoriasis Netz via Flickr
Disclosure: We have no position in OWCP and have not been compensated for this article.