Lpath Opts for Reverse Stock Split to Gain NASDAQ Listing (LPTN)

In a bid to list on the NASDAQ capital market, the biotechnology company Lpath (OTC: LPTN) announced a 1-for-7 reverse stock split of the company’s Class A common stock. However, following the news, the stock price receded to $0.66 in the first hour of trading with twice the three-month average volume.

The California-based Lpath focuses on the discovery and development of lipidomic-based therapeutic antibodies for treating human diseases. As of now, the company has three product candidates: iSONEP, intended for treatment of retinal diseases, ASONEP for treatment of cancer and multiple sclerosis and Lpathomab, for treatment of fibrosis, spinal cord injury, traumatic brain injury, neuropathic pain and cancer. Of the three, iSONEP and ASONEP have completed Phase I clinical trials, while Lpathomab is in the pre-clinical trial stage.

Lpath, which was trading at around $1.29 per share on January 26, 2012, had a steep fall to $0.90 per share when it announced the temporary suspension of dosing iSONEP in clinical trials due to compliance issues. Seeking Alpha published a report on February 2, 2012, and on February 29, 2012, identifying Lpath as a potential investment opportunity.

On March 6, the company raised approximately $9.3 million through the sale of nearly 12.4 shares of Class A common stock. Following the equity financing, the share price, which was hovering around the $1.00 level, declined to $0.78. Seeking Alpha published two more articles, one on March 7, 2012 and another on March 9, 2012, favoring investment in Lpath.

Later in the month of March, Lpath announced that it is planning to continue the iSONEP trial in the month of August. A month later, Lpath received its first U.S. patent for Lpathomab. The shares of Lpath briefly touched the $0.90-mark before retracing back to $0.70. On July 16, Aegis issued a buy rating for the stock with a $6.00 target price. Lpath once again made a reversal from the $0.70 level to touch $0.93 per share in the beginning of August. Later in the month of August, the FDA lifted the clinical hold on iSONEP.

To broaden the shareholder base and increase the appeal of Lpath’s stock to institutional investors, the company decided to list on the NASDAQ following a reverse stock split to meet the $1.00 minimum bid requirements. The company announced that the reverse stock split will not affect the voting power, rights and privileges of its shareholders.

The reverse stock split, effective the evening of October 5, 2012, will result in the reduction of issued shares and outstanding Class A common stock to approximately 10.5 million from approximately 73.7 million in the pre-split scenario. Also, the number of authorized shares of Class A common stock will be reduced from 200 million to 28.6 million. The company also stated that there is no change in the ticker symbol, although a “D” will remain added to the current ticker for 20 days beginning October 8, 2012, to alert investors about the reverse stock split.

Lpath ended the day at $0.70 per share, down $0.0410, or 5.5%, on a volume of 422,593 shares.

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Published by Steve Hackney

Steve Hackney is a corporate finance professional with over 14 years of experience in cash management and investing. He earned a Bachelor of Science in Finance from Florida State University and holds a Certified Treasury Professional certification. Steve lives in Orlando, Florida with his family.