I've written about Genprex (GNPX) a handful of times here. More times than not I've been able to identify a strong move coming within the stock. Note there is a "not" in there because I've been far from perfect on it.
The trade in this scenario was selling covered calls against HALF the long stock. This is a bit unusual, but this is also a name where I didn't want to limit the upside potential of a pop. Upside potential like we're seeing Tuesday, with GNPX shares up 70% at the time this was written (it's been both higher and lower from these levels).
In a tweet Monday, I believe I called the stock "stupid cheap." This came after reading Genprex's shareholder letter, a letter which failed to move the stock despite strengths. The quick takeaways from the shareholder letter:
- We won't get data on Tagrisso/Oncoprex data this yr as Phase I/II will enroll late 2020/early 2021
- Keytruda+Oncoprex trial big boost to pipeline
- Looking for partner to develop diabetes therapy
Honestly, this should have been enough to bump the stock, but I think some may have been expecting a summer timeline for data, which was never realistic. Also, the Keytruda part hadn't been priced into the pipeline as I saw it.
At a similar time as the company-issued shareholder update hit the wires, a paid promotional hit the inboxes of some folks. The immediate reaction from some was pump and dump. This despite the stock not popping. Also, the email did not include several points made by the company in its own news release.
This brought the trolls out and got me digging into what investors need to know. Are the trolls correct? Should we ignore it? Did the company buy a promo?
I'm getting one thing off the table first. The company did not pay for this email to go out. Not only did I contact the company to inquire (I heard back from the CEO, not a PR person, confirming they did not pay for the email), I also tracked the disclaimers in the paid promotion back through other paid promotions then cross-referenced into the company's recent SEC filing.
For me, the red flag in the paid promo was the use of the word "collaboration" with a Major. They actually used the shortened version "collab." The promo, of course, referred to Genprex combining Oncoprex with Tagresso in a forthcoming trial. That trial isn't a collaboration between the companies and Genprex has never claimed it to be.
Collaboration and permission are two different things. Think of it like Johnny Cash singing his version of Nine Inch Nail's song "Hurt." Cash had permission, but Trent Reznor of Nine Inch Nails had no input or part in the production of the cover song and video. Compare that to the recent collaboration of recording artists singing the Foo Fighter's song "Times Like These." The Foo Fighters participated in conjunction with the other artists. Collaboration.
So, the use of the word collaboration wrongly in the paid promotion got Genprex bears out in full force, but like many traders these days, the headline is the only thing people read.
I'm going to make a long story short. If one were to take the time to go through the promo disclaimers plus Genprex's 10-K and then link the multiple LLC media companies in the disclaimers of every paid promo covering Genprex in 2020, you would find that it all comes back to one media company, a media company that Genprex essentially fired way back in 2019. It was a media company Genprex's underwriters insisted they use as part of their IPO. When the contract ended, the company did not renew it, but bears don't want you to know that.
While it is impossible to say who hired the promoter, my highly educated guess is it would likely be a large shareholder. We know a warrant lock-up release will hit this month on the company's terrible raise in December (which I also wrote about). Those warrants are able to be exercised below $0.50. Hmmm.
The irony here is it was wasted money. Tuesday morning Genprex announced an expansion of 16 additional exclusive worldwide patent and tech licensing agreements with MD Anderson for Oncoprex. This will allow the company to potentially expand its pipeline to include trials with Tagrisso, Keytruda, Opdivo, and Yervoy, among other combinations. That puts Merck (MRK) , AstraZeneca (AZN) , and Bristol-Myers Squibb (BMY) on the frontline as potential suitors, in my view.
If a combination of Oncoprex works with any of the above, don't be surprised if a big pharma immediately scoops up Genprex to prevent one of the others from doing so. At the very least, it sets up potential collaborative working agreements in the future with one or more big pharma. Note, I said potential. But if you are buying a small biotech name, you want all the potential you can get.
With the stock pop Tuesday, Genprex's market cap sits at $125 million, the low end of what I believe is fair. I do expect some short-term pressure on the shares later this month when those warrants become available for exercise. On the plus side, it will bring additional funds into the company once exercised and should move the shares into strong hands for the long-term.
I did take some partial profits on the stock Tuesday, but continue to be a long-term holder and will buy on any warrant release weakness later this month, if we even see any.
Tim Collins provides options trade ideas each day on Real Money Pro, our sister site for active traders. Click here to learn more and get great columns, commentary and trade ideas from Tim Collins, Mark Sebastian, Paul Price, Doug Kass, and others.