Back at the start of June, Moleculin Biotech Inc (NASDAQ:MBRX) traded for just $0.75 a share. At last close, early this week, this had risen to $1.52. Premarket on Tuesday, the company gained a few more percentage points and will open the session at $1.57. Two key developments are driving this action – one pipeline related and another rooted in risk.
In an attempt to ascertain whether this run can continue, here is a look at these two drivers and a discussion of what we expect next from the company.
Let us look at the pipeline related driver first.
Last week, Moleculin announced that it had made a discovery on the back of its collaboration with M.D. Anderson Cancer Center with regards to a potential treatment for pancreatic cancer. The discovery, which the company has quickly termed WP1234, builds on the mechanism of action of its primary pipeline asset, the similarly named WP1122, which Moleculin is currently investigating as a potential brain cancer treatment.
The idea behind the treatment and the root of the latest discovery is pretty interesting.
Pretty much as far back as we’ve been able to study cancer under the modern scientific framework, scientists have known that cancer cells produce energy in a very different way to normal cells. Specifically, instead of using oxygen to produce ATP, they use a process called glycolysis, which converts glucose to ATP, bypassing oxygen. This translates to a much higher consumption of (and in turn, a much higher necessity for) glucose by cancer cells.
Concurrent to this understanding of the way cancer cells produce energy, scientists have long hypothesized that being able to starve cancer cells of glucose should result in their death. However, to date, it has been incredibly difficult to get any sort of drug to last long enough so that it effectively inhibits glycolysis.
With WP1122, Moleculin developed an asset that had a half-life of 6 hours (as compared to the half-life of just a few minutes recorded by previous attempts at this sort of approach).
Theoretically, that should be enough to go some way towards restricting a cancerous cell’s access to glucose and, as mentioned, the company is testing this hypothesis as part of a development program in brain cancer right now.
As relates to the latest discovery, the company has found a way to increase this half-life further (by how much, we don’t know yet), which means it could potentially have a comparable MOA but in pancreatic cancer – a cancer that, right now, has basically no treatment options outside of standard chemotherapy (which is relatively ineffective in this type of cancer anyway).
So that’s an exciting update and one that opens up the potential for numerous development-related catalysts going forward as the company puts the new discovery through its paces.
The second thing that is driving this stock is rooted in the potential for a reverse split.
As mentioned, at the beginning of June, Moleculin was trading below minimum bid threshold and was – as a result – at risk of delisting. This risk would have necessitated a reverse split, but the recent run has pushed the company above threshold and taken the potential for a reverse split of the table.
This lifting of a serious downside pressure (especially at this end of the space, reverse splits are widely viewed as indicative of weakness) has afforded markets an opportunity to focus on the operational side of the company as opposed to the risk and capital structure side, which has translated into a compounding effect on the science-driven run.
So, what’s next?
Well, we see much of the same.
There is a small dilutive risk rooted in the potential for a near-term raise (cash on hand at last count came in at $8.8million, which isn’t terrible, but the WP1234 asset is going to necessitate capital allocation towards a whole new program), but right now, this is the only real major risk.
Given the potential impact this new discovery could have in the pancreatic cancer space (as we’ve said, there are basically no good treatments, so even a small clinical benefit would be a major step forward), any raise is far from prohibitive to an exposure at current price.
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Image courtesy of Hanif Omar via Flickr
Disclosure: We have no position in MBRX and have not been compensated for this article.