Hello everyone,
Welcome to another Esports pyscho DD, but instead of looking at airport spas, we are looking at the biotech industry and an interesting company called Cortexyme, Inc. (ticker CRTX). Long story short, after a failed clinical trial with their experimental Alzheimer’s drug, atuzaginstat, this stock dropped 76% with short-sellers having a field day. Any additonal insight and guidance is much appreciated
What is CRTX?
Cortexyme Inc. is a clinical-stage biopharmaceutical company developing a disease-modifying therapeutic approach to treat Alzheimer’s and other degenerative diseases. Its approach is based on the seminal discovery of the presence of Porphyromonas gingivalis or P. gingivalis, and its secreted toxic virulence factor proteases called gingipains. The company operates in only one reportable segment that is developing and commercializing therapeutics.
Financials
CRTX’s financials are not that impressive or anything special, however, it is 63% institutionally owned which seemed interesting. Similar to any largely insitutionally owned stock, if a large owner decides to pull the trigger and buy, others may follow suit. Although, the company is yet to be profitable with this year’s financials still unreleased.
Net income
Cash
Total Assets
It seems institutions have mostly remained bullish even after the plunge, with some even increasing their positions.
Bull Case
CRTX has been beaten down by short-sellers after the experimental Alzheimer’s disease treatment, atuzaginstat, dissapointed in a late-stage trial toward the end of October. Unlike Cassava Sciences (ticker SAVA), CRTX has yet to make a recovery after having a devastating blow, which may have been warranted. However, this does not mean it is all over for the company. Similar biotech companies that have fallen after dissapointing news may be a blessing in disguise. One such example, Exelis (ticker EXEL) have risen 10x after a clinical failure of their product cabozantinib as a potential treatment for men with metastatic castration-resistant prostate cancer. Although it took a longer period of time, any positive news or update can spark a bull run on the stock.
During a recent conference call, Cortexyme management said that the drug does appear to show a worthwhile clinical benefit for Alzheimer’s patients who also tested positive for the gum-disease bacteria P. gingivalis. While this analysis is far from certain, it may help the company identify the correct patient population to evaluate atuzaginstat in, via another late-stage trial. Almost immediately after the drug disappointed in this all-comer study, management announced plans to target a more-focused group of patients in another pivotal study.
Short interest has steadily been rising since the announcement in late October, with a 48% rate on the float of 20 million. However, it is probably less to around 39% according to Mimir.
The chain for January is mostly bullish with the majority of the OI ranging from 12.5 - 40, however, there seems to be a large amount of OI, 5421, on the 185 strike. In my opinion, shares may be the safer play for this play, as it is not certain to run in January. It may run the week of Dec 27th, solely due to sentiment of Twitter and reddit. The time period I am tracking is the first quarter of 2022, as CRTX plans to provide an update in the next clinical trial which may trigger a “real” short squeeze rather than a retail pump and dump.
Caution/Bear Case
This is like one of those cases where it’s been beaten down so much already, it seems like it can’t fall further and seems there is more upside to it rather than downside. However, if the company never releases their prodouct , there is no profitability, therefore no reason to invest. Once again, if you do decide to hop onto this play, play with money you can AFFORD to lose. If it does run, take out your cost basis and you can let the rest run. Keep in mind I am not a financial advisor but a college student looking to make some gains. This ticker has not seen much sentiment yet, however, it was brought up to my attention by @thots_and_prayers and @anon59732070 that is has been talked about on Twitter (Will Meade) and r/Squeezeplays so be wary of a pump and dump, which is entirely possible. There is also a rumor about a “secret offering” which I was not able to find. I messaged the author of this message, and have yet to recieve evidence of this claim.
Conclusion
In conclusion, CRTX has the potential to be a short squeeze play with a nasty gap up to pre-trial levels as well as being a great long term hold later on when they update investors on their upcoming trials. Thank you for taking time out of your day reading my DD, and I will continue updating as I will keep my eye on this. Feel free to comment your thoughts and discuss. I would love to see everyone’s views. May we make even more tendies. To Valhalla.
Sources:
https://www.nasdaq.com/market-activity/stocks/crtx
https://www.nasdaq.com/market-activity/stocks/crtx/financials
https://finance.yahoo.com/news/cortexyme-atuzaginstat-slowed-cognitive-decline-163000480.html
The conference meeting: https://ir.cortexyme.com/events/event-details/14th-clinical-trials-alzheimers-disease-conference-ctad-2021-late-breaking