OWC Pharmaceutical Research Corp (OTCMKTS:OWCP) is down an incredible 99.9% on its February 2017 highs of $2.70 a share, currently trading for just $0.27 a piece.
Across the period, February to September, there has been practically nothing reported that would justify this degree of decline. The company has put out promising early-stage data, has given us an update on one of its most promising oncology programs and has announced the securing of what amounts to a distribution deal for a topical cannabinoid-based cream in Germany.
Well, it did all this between February and the end of June – then OWC went quiet.
The company seems to be making a concerted effort to keep developments close to its chest, especially over the last six weeks or so, and market perception of this – want of a better word – silence is that it implies near-term weakness.
We think the opposite.
Every time OWC has put out news over the past six months, the company has taken a hit to its market capitalization. This happens regardless of what the news covers and whether it is positive or negative for the company (and we haven’t really seen any negative news over this period anyway).
So why would this happen?
It’s not actually that complicated. The news that has hit press, or more accurately, the news that did hit press before the silent period started, wasn’t what markets were looking for. Sure, it was positive and implied near-term strength, but what shareholders really want is trial data and some indication of a clear pathway to revenue generation on the lead development programs. When OWC puts out press releases detailing other developments, shareholders got disappointed and sold out of the company.
It’s similar to an earnings miss, in a way. The company is still earning money (or in the case of OWC, advancing its pipeline) but not to the degree (or, again, in the case of OWC, in the areas) that markets were looking for.
Some would say this is a problem but that’s not necessarily the case. The reason why OWC hasn’t been putting out any trial data is that – right now – it doesn’t have the unblinded data in hand that markets are looking for.
The trial in question is a safety study that is ongoing in Israel right now, investigating the safety of a cannabis-based topical cream. The cream received the first ever Institutional Review Board (IRB) approval to conduct a safety study for a cannabis-based topical cream with more than 3% THC and it’s being conducted in one of the biggest academic hospitals in Israel.
A just-released letter to shareholders, which was written by new company Chairman Dr. Stanley Hirsch, suggested we will get an update as and when the numbers are available and a release from earlier this year suggested we should see something before the end of the third quarter.
This sets us up for something of a calm before the storm situation. It seems as though management has gone silent in order to wait until it has the news required to really get the stock running and we see the trial data as one of a number of key potential releases that could do exactly that.
Another speculative suggestion is that we will see some kind of joint venture announced between now and the end of the year, with this suggestion based purely on the fact that the above-mentioned Chairman already has relationships with some large names (he previously founded biotechnology companies and sold them to deep pockets).
Keep in mind that we are probably not going to see any degree of a turnaround before the numbers hit and there is no guarantee that they will during the third quarter. As such, we could see some degree of further depreciation near term. With that said, however, once the stock does get moving, it’s going to move far and the downside risk taken as part of an exposure at current prices seems small compared to the upside on offer longer-term.
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Image courtesy of javier ruiz77 via Flickr
Disclosure: We have no position in OWCP and have not been compensated for this article.