Cannabis stocks continue to enjoy some benefits which accrue to the industry, the largest of which is the rise in share price. Generally, cannabis stocks have benefited from increasing prices, driven mainly by the ever-increasing demand for the product and the shortage in supply for high-quality products. Moreover, with the industry and some countries now adopting both medical and recreational cannabis, the market participants have a much larger pool of clients whose needs are to be satisfied, and this has been the cause of both an increase in the industry valuation and consequently the company valuations.
Nemus Biosciences Inc (OTCMKTS:NMUS) has seen its valuation rise throughout the period (albeit there were a few periods of decline). The general trend for the company’s stock since August has been upwards, rising from about $.2 to highs of $.57. There was, however, a little price decline leading up to its the current price of $.554. As with most other stocks, the turbulence witnessed between October and December was also seen in NMUS, leading to a significant dip in the company’s share price during the period. That said, the general trend has been maintained as seen in the chart below:
Over the course of February, there has been a surge in the company’s share price which has culminated in the near 100% increase in price witnessed during this month – from $.3 to $.556. This piece goes on to review the reasons behind this price increment and evaluates the expected future trends.
NMUS: Past and Present
Nemus Biosciences Inc was founded back in 2012 and headquartered in Long Beach, California.
The firm prides itself in being a biopharmaceutical company focused on the development and commercialization (through delivery) of cannabinoid-based therapeutics to their clients. Their key advancements have been the development of drugs meant for treatment of glaucoma, chemotherapy induced nausea and vomiting, dry eye syndrome, diabetic retinopathy among other ailments. Their vast research has led to the development of three proprietary drugs: NB1111, NB1222 and NB2222 (which are used for the aforementioned conditions).
The firm’s partnership with the University of Mississippi has been critical in ensuring that they further their research (through harnessing the technology, equipment, and data available within the university) and continue to develop and commercialize the products for these diseases.
One of the biggest developments in the sector was the approval of GW Pharmaceuticals’ epidiolex drug by the Food and Administration Agency (FDA). This presented the first case of a cannabinoid-infused drug receiving a thumbs-up by the FDA; a major leap for cannabis sector players.
As a result, many companies have ventured into the development of different cannabinoid-infused products as a way of ensuring that they join the bandwagon as early as possible. One such entity has been Nemus Biosciences and for this reason, among others, we believe that the company is headed in the right direction.
The Committed Financing
As discussed in our last review of the firm, Nemus Biosciences’ majority shareholder, Emerald Health Sciences, Inc, announced back in October 2018 that they were committing $20 million through a credit facility provided to finance the company’s operations. Furthermore, they committed to purchase additional stock in the company worth about $10 million in the open market.
The $20 million facility was provided at arms-length, therefore, NMUS can draw down on it at their discretion without any penalty. Terms included a coupon rate of 7% per annum and the option of converting the debt to equity at a strike price of $.4 per share. The firm will also have to issue warrants with an exercise price of $.5 per share (these include other financial provisions therein). Finally, Emerald will purchase the $10 million in stock in line with the requirements by the Securities and Regulatory Commission (SEC). The company is, however, yet to purchase any shares to date.
In Emerald’s view, the financing was needed to ensure that they achieved the set financing requirements for the coming year. This included commencing clinical trials for NB1111 which is useful for treating glaucoma as well as ensuring their pipeline for the development of proprietary products is grown. With new formulations hitting the market every day, it has become more apparent to the directors at NMUS that in order to remain ahead of the curb, additional funding needs to go into research and development.
The development of the above drug as well as the other two will give NMUS the ability to push for its commercialization, therefore, reap the benefits of its future revenues. This is therefore why Emerald left the option of converting the above shares and receiving additional warrants as the upside associated with the success of these drugs would be monumental to both firms. As such, the market will need to continue watching out for the above drug so as to establish how the clinical trials and consequent FDA approval pan out over the course of 2019.
NMUS has continued to appear in public forums, presenting its research and output to the press and public. In these forums, NMUS’ Dr. Brian Murphy continues to present additional information as to the advancement of NB1111, their drug meant to manage and treat glaucoma.
Currently, Dr. Murphy has attended a number of conventions which include: The NobleCon XV Annual Investor Conference and 8th Annual Glaucoma 360 New Horizons Forum and The BIO CEO & Investor Conference. The conventions go a long way in sensitizing the market on what is actually happening in NMUS, therefore, marketing the firm in the process.
With Dr. Murphy continually sensitizing the market on the NB1111 drug, the interest in the product continues to arise. NMUS is therefore at a position where they can benefit from the perks associated with FDA thumbs up, such as was the case with GW Pharmaceuticals. Should this happen, it is expected that NMUS will see a major breakout in its share price.
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Disclosure: We have no position in NMUS and have not been compensated for this article.