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PORTAGE BIOTECH IN COM NPV (OTCMKTS:PTGEF) Is A Small Cap Gem

PORTAGE BIOTECH IN COM NPV (OTCMKTS:PTGEF) Is A Small Cap Gem
Written by
Jim Bloom
Published on
October 3, 2017
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PORTAGE BIOTECH IN COM NPV (OTCMKTS:PTGEF) is a small cap worth watching closely. In just about two months, the stock has nearly doubled.PTGEF was trading at $0.34 on August 1, 2017 and by September 29, 2017 it had risen to $0.62.This implies a return of more than 82% in just a few weeks. We see more upside potential in PTGEF, and in this piece we let you see for yourself what the future holds for this stock.But before we get into the details, take a look at the price action. PTGEF Daily ChartPTGEF began the month of October 2017 on a negative note, with the stock pulling back on the first trading day of the month. We note that this was largely due to market participants misinterpreting or overreacting to an announcement by Biohaven Pharmaceutical Holding Company Ltd. (NYSE: BHVN) – one of the companies in which PTGEF is financially invested.We’ll look into the details of Biohaven’s announcement shortly.BusinessFor the sake of our readers who are getting to know PTGEF for the first time, a brief profile of the company will suffice.PTGEF operates through subsidiaries, which are engaged in researching and developing treatments. The subsidiaries are focused on creating pharmaceutical products that address existing unmet medical needs through proof of concept. The strategy of PTGEF is to sell or license its drug discoveries to large pharmaceutical companies for advanced development and commercialization following proof of concept.Besides its operating subsidiaries, PTGEF holds stakes in a number of strategic companies. One of its holdings is Sentien Biotechnologies, a privately-owned, clinical-stage firm that is pioneering novel approaches to cell therapy. PTGEF’s other holding is Biohaven, a publicly traded company that aims to become a leader in creating innovative therapies for neurological diseases.Recent developmentsOn October 2, 2017, Biohaven announced that a drug compound it was developing as a treatment for patients with spinocerebellar ataxia (SCA) failed to live up to primary and secondary endpoint targets in a Phase 2/3 clinical trial. Biohaven tried the compound, trigriluzole, in 141 adult SCA patients at more than a dozen centers in the US.There are two ways to understand this Biohaven announcement in relation to PTGEF. First, the failure of trigriluzole in the Phase 2/3 clinical trial for SCA indication doesn’t mean the end of the road for the compound. Biohaven continues to study trigriluzole in an extension phase whose topline data is expected before the end of 2018. The extension phase will enable Biohaven to decide the way forward with the compound.Second, as much as Biohaven’s failure with trigriluzole concerns PTGEF, the risk is limited and this is likely something that most market participants failed to notice. For example, since Biohaven went public earlier this year, PTGEF has limited exposure to the business as it only owns a little over 6.3 million common shares in the company. Furthermore, PTGEF is only waiting for the right time to exit its position in Biohaven.What’s the point here? Judging PTGEF’s prospects based on what happened at Biohaven misses the point and looks unfair. For savvy investors, the dip in PTGEF may just present a buying opportunity.Positive balance sheet adequate financingIf you look at what transpired at PTGEF’s annual shareholder meeting in July and the company’s June quarter financials and updates, you begin to see why the stock is exciting.PTGEF held its annual special meeting of shareholders on July 6, 2017 and updated on the outcome of the meeting on July 12. During the meeting, several proposals came up for voting. One of the proposals was the appointment of six nominated directors to the board of PTGEF, and this proposal received an overwhelming support from shareholders, with 99.87% of votes being cast in its favor, while no vote opposed it. Just 0.13% of the votes abstained.Shareholders of PTGEF also took the opportunity of the special meeting to approve consolidation of the company’s stock. In a vote that ended 99.66% in favor and 0.34% against, shareholders authorized the board to do a reverse stock split in which one share would be issued for up to 80 existing shares. This kind of stock consolidation is known to reduce the number of shares available for trading on the public market. By simple economics, short supply of shares should lead to increased demand and higher prices.PTGEF’s subsidiaries are not generating revenue yet, but that doesn’t mean the company is cash strapped. At the end of its June 2017 quarter, PTGEF had cash of $448,128 on the balance sheet, which increased from $159,377 in the prior quarter. The company’s assets at the end of the quarter were up at $159,808,527 compared to $59,903,553 in the prior quarter. PTGEF’s carries limited liability of just $373,811.Besides the positive balance sheet, PTGEF said that it has secured sufficient financing that will meet its operating commitments. However, the company remains flexible to raise additional capital to meet its financing needs, especially in relation to funding clinical trials that if successful would yield massive revenues.ConclusionTo sum up, the selloff in PTGEF that followed Biohaven’s update on a failed clinical trial shows just how the market has yet to appreciate PTGEF’s prospects.We will be updating our subscribers as soon as we know more. For the latest updates on PTGEF, sign up below!Disclosure: We have no position in PTGEF and have not been compensated for this article.

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