OncBioMune Pharmaceuticals Inc (OTCMKTS:OBMP) shares have taken a dive in recent weeks. Investors are searching for the answer to one simple question: should one see this as an opportunity or a sign to run away. To answer that question, one needs to understand the market for shares of a stock. It’s very much like an ecosystem.
Not everyone in the tape is buying and selling for the obvious reasoning that most of us can plainly appreciate in a face value manner. Some are involved in processes with roots in logic that have nothing to do with moment-to-moment appraisals of the future stream of earnings or the value according to longer-term fundamentals for the company. In this case, it would appear that one might make a case for convertible debt selling as a sort of artificial depressant of OBMP share prices.
OncBioMune Pharmaceuticals Inc (OTCMKTS:OBMP) is a clinical stage biopharmaceutical company that develops cancer immunotherapy products. The company has proprietary rights to a breast and prostate patent vaccine; and a process for the growth of cancer cells and targeted chemotherapies. Its lead product is ProscaVax that is in the planning stage of a Phase II clinical trial for the treatment of prostate cancer.
It’s important to keep in mind that OBMP could be interesting as an easy fit for a few different names as far as a take-out candidate.
Just starting with those in the space who have shown a clear interest in development or acquisition of assets that offer potential for market share in the prostate cancer segment, one can easily point to the likes of Seattle Genetics, Inc. (NASDAQ:SGEN), Inovio Pharmaceuticals (NASDAQ:INO), Nymox Pharmaceutical Corporation (NASDAQ:NYMX).
The company also has a portfolio of targeted therapies. OncBioMune Pharmaceuticals, Inc. is headquartered in Baton Rouge, Louisiana.
Driving: A Convertible
The nature of the recent action has the distinct smell of converted shares or hedging shares being unloaded. The only difference between the two is whether or not the conversion has taken place yet.
From the company’s recent 10-Q, we know that, last November, the company issued an aggregate subscription amount of $350,000 to particular investors with the following breakdown in securities: (i) 14.29% Original Issue Discount 10% Senior Secured Convertible Notes; and (ii) warrants to purchase 2,333,334 shares of the Company’s common stock at an exercise price of $0.175 (subject to adjustments under certain conditions as defined in the Warrants) which are exercisable for a period of five years from the Original Issue Date.
That’s essentially a burden for the shareholders of the company to bear. Sometimes, the owners of such obligations seek to enable the longer-term success of the company, and sometimes they simply grab the cash they can. In this case, it looks as though the latter strategy has been in place for the past 4-6 weeks.
As this convertible selling is running the tape, the stock is getting pretty beaten up. But it’s important to keep perspective here.
We still have a company with an apparently viable prostate cancer drug pipeline asset which is heading into phase II trials, according to company messaging. That’s a key asset seeking sales status in a $7B market segment.
In addition, we saw the completion of the acquisition of Vitel Laboratorios S.A. de C.V., establishing OncBioMune Mexico S.A. de C.V. as a wholly-owned Mexico City-based subsidiary of OncBioMune as it integrates Vitel’s operations into a component of the Company. The acquisition transitioned OncBioMune into a revenue-generating company with two recently commercialized drugs and a portfolio of others either already licensed or in negotiations for licensing or acquisition.
Sales in Mexico from September 16, 2016 to April 17, 2017 for Bekunis for constipation and Cirkused for stress were approximately US$350,000, exceeding projections for US$155,000 initially forecast for the first seven months at product launch during the third quarter of 2016. The Company anticipates that sales efforts will continue to accelerate and anticipates combined sales in the range of US$750,000 to US$850,000 for the products in 2017.
Given the abject oversold status of the stock on the charts, the company’s vulnerability to the price-per-share distorting impact of convertible debt selling, and the company’s route to near-term top line growth, one has to seriously look at this stock as a potential opportunity from current levels. Market participants unaware of this set of factors may be further distorting the price of the stock by running with the herd. That’s how some of the best opportunities appear in the stock market. It just ain’t easy to spot them in real time. This maybe one of them.