We took a close look at Nascent Biotech Inc. (OTCMKTS:NBIO) two weeks ago on September 6 (that piece is here) as a classic deep value play in the biotechnology space.
We are following up on that piece today because of a very important recent disclosure from the company that helps to fuel what looks increasingly like a very exciting story in the making.
Note, since we put out our September 6 piece, NBIO shares have taken off, ripping higher from roughly $0.06/share to about $0.15/share. That’s about 150% in gains in eight trading sessions.
Before we get to the new catalyst, let’s review the original argument.
The Biotech Stock Price Discovery Function
The main gist of our argument in favor of Nascent Biotech Inc. (OTCMKTS:NBIO) is still every bit as urgent and clear today as it was on September 6. The 150% rally is really just a tiny piece of the move we would expect if NBIO shares handle price discovery at this stage in a manner that roughly resembles what we generally see in biotech plays with unproven platforms and flagship compounds hitting Phase 2 research for the first time.
In short, stocks in this space usually price in some percentage of what you might see in long-term cash flows from commercialization of their lead asset. This is driven by the sense that either Phase 2 trials are going to go well, or they aren’t. No one knows how that’s going to turn out once it gets underway. But the big step, typically, is getting the FDA to sign off on moving to Phase 2, where trials are all about establishing, or failing to establish, real therapeutic value. This is especially true given what we saw in Phase I from NBIO’s flagship asset, Pritumumab (PTB)—which we will cover below. Basically, it showed some clear hints of real promise.
No one knows how Phase 2 is going to work out for NBIO at this point. But it’s certainly more than a distant possibility that we will see a series of revelations that position this drug as a major asset in the industry. And, if that turns out to be the path ahead of us, PTB is especially interesting because, as we discussed last time, it is a potential ‘generalist’ in the oncology space.
PTB is being tested now for brain cancer. But it potentially will have multiple applications because it binds to cell surface Vimentin (also referred to as ectodomain vimentin), which is a protein expressed on the surface of epithelial cancers, or carcinomas, which are the most common forms of cancer. If it turns out that PTB is a winner in glioblastomas, it may well turn out to be a winner against breast, lung, prostate, colon, and skin cancers as well.
In other words, pricing in even just a small percentage of future cash flows from the probabilistic universe that contains PTB’s eventual commercial success is a big, big thing. Certainly, quite a lot more than $0.15/share on a $17 million market cap.
Still, NBIO shares have been on fire, and getting the FDA to formally give the “okay” to Phase 2 PTB trials is the clear catalyst. However, the move we have seen thus far possibly just scratches the surface of what’s possible here.
Getting the Hooks Out
Nascent Biotech Inc. (OTCMKTS:NBIO) put out an 8K earlier this month. It was under the radar, but it represents something important for the company and its stock.
Specifically, the company recently disclosed that, on August 31, 2023, it voluntarily entered into an agreement with a major creditor, YA II PN LTD, to trigger non-toxic repayment of $400,000 of the Company’s convertible debentures held by YA II. In fact, NBIO has already paid off $50,000 of the debt (on August 24). The next payment of $50,000 is set to go out on or before September 30 followed by $50,000 on or before October 31 and then $250,000 on or before December 31, 2023.
The most important part of this announcement is that NBIO lined this up. Management appears to have positioned itself to comfortably clean up the company’s balance sheet and significantly reduce future dilution risk from conversion of these notes in 2023.
This is a very important clue about this story, as we see it. It is very similar to the company’s recent announcement that it was actively shoring up its IP stronghold by terminating its licensing agreement with China based BioRay Pharmaceutical, which was originally put in place on March 31, 2021. NBIO wanted to regain full control over PTB. That smacks of confidence in the coming trajectory of clinical research.
With the move, Nascent regained its worldwide marketing and distribution rights previously licensed to BioRay. Management has clearly decided that regaining worldwide rights will put NBIO and its shareholders in a stronger position going forward.
Similarly, we are now seeing another key signal that NBIO management and its board are acting to shore up the company’s prospects in a manner that would make the most sense in a world where the PTB Phase 2 research worked out. In other words, leveraged debt obligations amount to an outsized potential piece of the pie in terms of owning the future value of PTB as an oncology treatment.
It’s not like a biotechnology firm with no commercial assets would make a move like this out of pure capital efficiency. After all, the money hasn’t started to come in the door yet. Hence, most companies at this stage clearly prefer to have cash and debt instead of neither. But, you would be incentivized to remove dilution risk and toxic stakes that had the potential to convert to outsized equity control in front of new clinical data if you felt confident in what that clinical data might show.
In both cases—the move to terminate BioRay’s access to marketing PTB down the line and the move to push out Yorkville Advisors’ potential to control an outsized stake—only really make sense from one perspective: the biggest stakeholders at NBIO appear to have significant confidence in what we will see in data drops from PTB‘s Phase 2 research journey.
So Far So Good
PTB’s Phase I research process went smoothly and clearly generated results promising enough to warrant Phase II exploration: 15 patients received PTB and were evaluated for safety and efficacy analyses. 12/15 patients had a diagnosis of glioblastoma and one patient each had anaplastic astrocytoma, oligodendroglioma, and non-small lung cancer with brain metastases.
There were no dose-limiting toxicities to this natural human IgG mAb. Overall, the study reportedly found that single-agent Pritumumab is safe up to a dose of 16.2 mg/kg every 7 days in brain tumor patients. One partial response showed nearly a 98.0% and 40.8% reduction in 2 tumor lesions for 17 months of study.
“The presentation displayed our Phase I data, which included our safety data at various dose cohorts and early outcomes data, was well received and viewed by interested parties at the conference. In summary, it showed the drug to be very safe at 5 ascending dose cohorts and definitive bioactivity in several patients,” stated Dr. Mini Gill who presented for the Company at a recent conference.
And yet, as we pointed out in our prior piece on NBIO, shares of the stock have priced in about 1% of the upside potential in terms of future cash flows from commercialization if the compound successfully moved forward from here and is eventually approved.
In other words, even with the recent 150% move, NBIO shares remain dirt cheap based on what we often see following Phase 2 clinical research approval from the FDA.
