Weekly thought on $AEMD, $IBIO, $LRAD, TRXC

Before you read on, please be aware that the analysis below is my opinion only and may include flawed assumptions and inaccuracy of logic; therefore, caveat emptor applies here.  Furthermore, all emphasis (color-coded, boldness, and underlined) on the excerpts are my own.

This week became another week to support the possible double-top formation I postulated in my previous two blog posts.SP-500_weekly This week was a down red bar below the last doji bar week. Per my book, a down week after a doji bar week near resistance has a better than 50/50 for bearish momentum to continue. The bright side to this week down bar was that it was a small range bar.  So, I will say the % increase for bearish momentum is very tiny.  This is because the overall current short-term trend is still up.  Taking out the resistance is now the major hurdle for the bull to continue. Failure to do so may only add fuel to the bear.  What we want to avoid is a waterfall week similar to the big down bar on Mar 23rd.  So, overall, I remain conservative and prefer to hold on to a bit more cash.

Nevertheless, when it comes to $IBIO, I am quite the opposite of conservative.  This week I gobbled up even more shares because the market value has gone into an extremely compressed mode that, in my humble opinion, any hint of a catalyst about to happen is going to set off this stock to explode skyward.  Let me explain…

This week, the company filed Form 424B4 on June 22nd, and the followings were disclosed:

PROSPECTUS

4,350,000 Shares Common Stock
6,300 Shares of Series A Convertible Preferred Stock (potential aggregate total of 7,000,000 common shares)
5,785 Shares of Series B Convertible Preferred Stock (potential aggregate total of 6,427,778 common shares)

Plus

2,666,666 shares of common stock to cover over-allotments

Assuming over-allotments are purchased as well, the immediate addition to the outstanding shares will be 7,016,666 shares to the market (4.35 million plus 2.67 million over-allotment shares)

Thus, the total outstanding shares after the secondary offering will then be 18.61 million shares outstanding (current 11.59 million plus the 2nd offering of 7.016 million).

What about the convertible preferred shares that can potentially add another 13.4 million shares (7 million shares from Preferred A and 6.4 million shares from Preferred B) to the outstanding shares?  I see preferred shares as irrelevant because they are NOT being added to the float at this point.  And with potential business expansions coming online in the second half of 2018, the stock price is going to go up based on the CURRENTLY available float.

Now, take a look at the cash the company will receive when the secondary offering is completed with over-allotments purchase.  IBIO_2nd_OfferTtlThat is $17.5 million added to the bank account.

At the current closing price of $0.8679, the new market cap after secondary offering will then be $16.15 million (18.61 million outstanding shares x $0.8679).

Did anyone see the big elephant in the room?

$17.5 million cash versus the market cap of $16.15 million.

Ok, we all know this $17.5 million cash will be used for working capital, but this amount of money should last at least a year from July.  And giving the potential business expansion reflected in the FWP, iBio should be generating revenues in the second half of the year.  Take a look at one of the chart from the FWP below: IBIO_2018Just by looking at the chart above, one could deduce that starting in July, we should hear news regarding new CDMO contracts, collaborative product development agreements, and/or expand business agreements in emerging markets since their bars on the above chart were drawn from the middle of 2018 to 2021+.  Meanwhile, initiation of Phase 1 clinical trial of IBIO-CFB03 bar appeared near the end of 2018, so I expect to hear filing of IND between the 3rd and 4th quarter of 2018.

And we haven’t even discussed the intrinsic value of the potential favorable legal settlement against Fraunhofer-Gesellschaft in Delaware Chancery Court. If we are to apply an ultra-conservative 10% of the relief sought by iBio for damages against Fraunhofer (including the U.S. unit, now exceeds $200 million), where is the intrinsic value of this $20 million ($200 million x 10%)?

Below is the summary of the intrinsic value of iBio beyond current financial status:

  • iBio plant-based protein expression technology patents
  • an integral part of DARPA’s (Defense Advanced Research Projects Agency) Blue Angel Program
  • CDMO contracts
  • collaborative product development agreements
  • expand business agreements in emerging markets
  • initiation of Phase 1 clinical trial of IBIO-CFB03
  • expected value (low end) of potential legal settlement from Fraunhofer-Gesellschaft

And what valuation has the market placed on the intrinsic value of $IBIO mentioned above?

You guess it.

There is NONE since market cap of $16.15 million is less than cash of $17.5 million.

As of Friday closing price, the market did not account for the intrinsic value of iBio’s technology which to me is grossly misrepresented because of short-sellers manipulation.  As a result, it is my 2 cents that $IBIO is now classified as a diamond in the rough and this diamond will not stay hidden for long once catalyst news surfaced. Hence, this extreme market disequilibrium for $IBIO is going to cause the price to explode skyward on news of contract agreement or a nod from FDA for AEMD’s hemopurifier to commence on mass production.

Do you know why I believe that any catalyst news will kick this one up to the blue sky?

That is because once news comes out, the smart money is going to come upon this jewel of a gem. They are going to buy it up as much as they can before the price return to their true fair value based on the potentials.  Much like a heart patient jumps back to life after getting shocked with a defibrillator, $IBIO is going to jump up so fast that it’s going to knock the teeth off the short-sellers when news of catalyst hits the newswire.

As far as I’m concerned, the short-sellers who came in last week have stepped onto a landmine unwittingly. In summary, it’s my 2 cents that $IBIO is near the absolute bottom and its tightly wounded spring is getting ready to release its tension in full force!  Folks, hang on to your hat!

Each week passed is each week closer to hearing from FDA regarding $AEMD commercial pathway for its hemopurifier.  Also, since we are already in June, we are closer to hearing about the possible contract award from National Cancer Institute (NCI) regarding the Phase 2 trial using Exosome therapeutic treatment for patients with metastatic cancer which is worth 1.5 million dollars over two years.  Don’t forget a Phase 2 contract award means NCI is continuing the study of using exosome therapeutic to treat metastatic cancer. In other words, the potential use of Exosome for treatment of cancer will still be ALIVE when Phase 2 study is awarded by NCI!

$LRAD made another week of strong rally and is now getting ready to break out of the $2.60 resistance that we haven’t seen since late May 2015.lrad_monthly The monthly chart above is showing a long-term set up for a cup & handle breakout.  Per my book, the longer it takes to form a cup & handle, the more sustainable is the direction of the breakout.  If there is substantial news coming, $LRAD is going to break through $2.60 and $3.00 like a hot knife passing through butter.

Below are excerpts from the recent quarter earning transcript that highlighted the potential catalysts that may appear in the second half of 2018:

With the expected increase in government, public safety funding for local, regional, and national emergencies, and the number of people in the world using cellphones projected to surpass 5 billion in 2019, we see substantial opportunities for fully integrated turnkey solutions that combine LRAD’s advanced mass notification voice broadcast systems and Genasys’ location-based mass messaging software.

Earlier this month, we met with officials from the U.S. Army and received an update of the status of the AHD program. Our key takeaways for the meeting are that the Army is committed to meeting the requirements of the AHD program, and we anticipate a competitive solicitation in fiscal 2018.

Strong fiscal first half revenues, $9.3 million in backlog, and a pipeline that has grown 35% year-to-date has the company on track for significant fiscal year-over-year revenue growth and well-positioned for fiscal 2019.

Jonathan Manela

All right. Let me re-ask the question. I screwed that up. So, the combination of the hardware/software business post-Genasys acquisition, do you guys have a handle on the specific markets that you are going after, how big that is?

Richard Danforth

Yes, how big it is, it’s essentially you want to ask, as many market research studies that have been done, that show it in the billions of dollars. We had one done specifically and it’s consistent with everyone we have read independently. So it’s a quite a large and growing at a double-digit CAGR.

Richard Danforth

Sharing it would not necessarily help us in the competitive marketplace. So, I am not going to answer that question. But I will tell you that we have had interest from customers including large municipalities and higher education opportunities.

Anyone of the above or combination of the above catalysts can easily propel this stock above $3 and beyond quickly.  My 2 cents is that the world market is finally ready to adopt the technology of $LRAD.

$TRXC finally broke through $4 wall 15 minutes before market close.  Alas, I didn’t have a swing-for-the-fences position to partake on this breakout.  Actually, I did try to load up for a breakout of $4 an hour before close but the failure to break $4 at that time stopped me out of the added shares.  And with the market coming into the closing bell, I chose not to load up again.  This decision also came from my desire to hold on to more cash before the weekend since I’m still in the conservative mode due to the possibility of a broad market double-top formation.  However, I’ll be looking for a re-entry point for adding more shares going forward.

The drawdown from $IBIO took a bite of my port this week despite gains from $LRAD and $TRXC; however, I’m not worried and have full confidence that my port will gain nicely by end-of-year.

Current positions (in alphabet order):

AEMD  IBIO  LRAD  TRXC & cash (up 11.8% YTD)

My 2 cents

From my camera:

DSC02437



Categories: trading journal

3 replies

  1. You are welcome!

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  1. Weekly thought on $AEMD, $AMRN, $CARA, $IBIO, $LRAD, TRXC – Trading my two cents

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