PolyMedix, Inc. (OTCBB: PYMX) has become yet another example of a company whose shareholders are forced to make their investment decisions based on what could be or what is apparently so. Since noted chemist William DeGrado cofounded PYMX back in 2002 the biotechnology company has been working toward developing non-peptide, small molecule drug treatments for, among other things, serious infectious diseases and acute cardiovascular disorders. Success in this area represents “what could be,” and for shareholders that could be a significant payday. As for “what is apparently so” the outlook isn’t so positive.
At the end of the day investors don’t want to feel like they are making a decision based on a piece of information handed out by a company only to find out a month later that the company’s actions are counter to what they stated. Unfortunately for many shareholders of PYMX this is the “what is apparently so” and this is why, in large part, the reason shares sank to a 52-week low on Wednesday with trading volume that was more than 10x its average by midday.
Triggering this slide was PYMX’s announcement on Wednesday that they had priced an underwritten offering of 25 million units, each unit consisting of one share of its common stock and a warrant to purchase one-half of a share of its common stock at an offering price of 0.80 per unit. Those warrants will have a five-year term and an exercise price equal to 0.80 per share. PYMX also provided the underwriters a 30-day option to purchase up to an additional 3.75 million units at the offering price.
The net proceeds of this offering, about $18.6 million, will primarily be used to continue the clinical development of PYMX’s lead drugs, PMX-30063 and PMX-60056. All of this sounds about right, as an emerging biotech company it stands to reason that PYMX would need to raise money to continue their development but it was just a month ago when they filed their 10-K that the company said “We believe that our current cash and investment balances as of the date of this filing will be sufficient to fund our operations for at least the next 12 months.”
For shareholders who were holding on at 0.96 when that 10-K was filed on March 7, 2011 thins appeared to be in order yet Wednesday’s offering has done little to suggest that is the case, upsetting the shareholder base and causing a serious flood of selling. Many of these shareholders that exited had been holding long for some time, believing that PYMX had a great opportunity to capitalize in a market that is dramatically underserved. The exit of these shareholders and emergence of the more short-term shareholder could cause additional problems for the share price and does little to attract more promising investors.
Of course with shares now sitting around the 0.67 – 0.69 range, below the 50-day moving average of 0.92 and 200-day moving average of 0.92, it could be a great opportunity for those who do see the value in what PYMX is trying to develop.
Back in early February 2011 PYMX announced they had initiated their Phase II clinical trial to assess the safety and efficacy of PMX-60056, a synthetic small-molecule anticoagulant reversing agent active against both heparin and low molecule weight heparin (LMWH), in reversing heparin in patients undergoing Percutaneous Coronary Intervention (PCI) procedures. The company expects the study to be completed by the end of the year, meaning the road to market is still a long way away.
That being said, PMX-60056 would certainly fill a need in the medical field as an anticoagulant reversing agent due to the potential issues related to protamine, currently the only agent approved to reverse the action of heparin. PMX-60056 could also be a financial payday as a treatment for the reversal of LMWHs which are needed by patients in need of long-term anticoagulation outside of the hospital. As it stands there are drugs approved to reverse LMWHs.
PYMX appears optimistic about the future of PMX-60056 as company President and CEO Nicholas Landekic stated back on Feb. 9, 2011, “To date, we have successfully completed four clinical trials, including three Phase 1B/2 studies with efficacy assessments where PMX-60056 safely reversed both heparin and LMWH. We are proud to be developing this unique anticoagulant reversing agent to address these important unmet medical needs.” Now that enthusiasm from Landekic may be the company’s position yet there are a number of shareholders who have pointed directly at the CEO and management in general as the reason for exiting their position.
Issues with management aside, PYMX is also in the process of developing their first-in-class antibiotic PMX-30063 which mimics the activity of host defense proteins. PMX-30063 is currently in a Phase II clinical trial for treatment of Acute Bacterial Skin and Skin Structure Infections (ABSSSI) caused by Staph and on Feb. 24, 2011 the company announced they had completed a Phase I exposure-escalation clinical study with PMX-30063 which showed it to be safely administered at a high dose for more than five days, this supports the dosing levels that are being studied in the Phase II efficacy study in Staph infections. To date the company has said there have been no significant clinical neurosensory abnormalities noted.
Now all the work that PYMX is doing on the development side is significant yet there are legitimate concerns about the accumulated deficit the company is currently facing, according to their 10-K $64,204,000. Of course that figure is expected to climb higher as the company stated “we expect to continue to incur substantial losses in future periods.”
PYMX is in a tough situation as they have no products on the market and know they need FDA approval to capitalize on their treatments. That being said the FDA approval process is a long and expensive road which of course means money that isn’t coming in from the sale of products must come in through the sale of something else, namely shares, further diluting the position of current shareholders. All of this is for the greater good, FDA approval and skyrocketing share prices but the likelihood of that occurring anytime soon is slim.
While they may not be able to do it on their own, if PYMX were able to strike a deal with a significant player in the medical market they could find more confident investors. In the meantime it’s a waiting game and a long one at that.