I’ll go into depth tomorrow when I’m on my pc, but to summarize, it’s a Pre commercial drug company trading at 160m CAD mcap that just had a ph2 readout a week ago and have another phase 2 trial expected start of q4. Their last readout didn’t meet primary endpoints and it’s method of action is very questionable to say the least (involves using weed as a cure). And it dropped 30% off the first readout and has recovered back to the same levels since. So why am I short? Cash. From their earnings call earlier today, it was revealed they had only 18m CAD remaining end of q2 while burning 2m cash per month and 600k non cash. Along with 8 million in P/A liabilities. So they have very little run time left and would run out in November-December. Which means they have to raise. Their second drug is also very questionable but I’ll focus on the first one. The bull case here is they find a partnership to start a phase 3 (since they need money) and don’t have to dilute (would Probaly double the stock). The issue is because of their questionable q2 data it’s relatively unlikely (<10%). The 20% increase today could at worst indicate this is happening but I remain very skeptical especially since nothing was announced during earnings call. What is more likely to halppen is that they do an extremely large dilution. Phase 3’s will cost at least 50-60m so generously it would plummet 30-40% at least and if their second readout fails to it could drop sub 50 cents range (>80% second readout fails) since it’s also very questionable. Borrow rate right now is very low 4%. So I’m playing it as 1-3 month short swing most likely holding till post raise and second readout. Bear case is they find a partner so they don’t have to dilute.
#My first Short post $CRDL
candid snow
candid snow
Okay so adding more color and a little more context let me go into the details of their first trial. If you only read the top line u would see first primary end point had a p value of .054 but if you look at the details, this was picked from a post-hoc sub group (you inherently make some subgroups and your bound to see some results). Why is this bad? Well post hoc subgroups are not created evenly (people with similar bio makers aren’t intentionally separated etc) and if even a cherry picked subgroup only has a p value of .054 it looks really bad. And to add onto this the second primary endpoint completely failed a whole where there was no difference between result and placebo
So to summarize this company dependent on a single drug just had pretty bad phase 2 results
And additionally they need a partner to start a phase 3, but everyone knows it’s going to fail since even their phase 2 results were bad with a MOA that makes no sense and they have no cash so they will never find a partner
So their only possible action is to either raise to start a ph 3 (probsly what they wanna do so management keeps getting paid) or dissolve the company
And as I explained earlier they have generously 3 months left till no cash
I’m short 43k shares
candid snow
im out 15% today