Overvalued Titan Pharmaceuticals Sells Convertible Securities

Villamayor Capital profile picture
Villamayor Capital


  • Titan Pharmaceuticals commercializes its FDA-approved Probuphine for management of opiate dependence.
  • The company is selling several new convertible securities, which will increase the dilution risk for shareholders.
  • Titan is signing loan agreements that most investors will dislike. In July 2017, the company signed a loan agreement with a financial institution, which bears interest at LIBOR plus 8.4%.
  • Assuming 2019 revenues of $3 million, the company is trading at 4.3x forward sales, which seems a bit expensive.

With a large financial risk and trading at an expensive multiple as compared to peers, Titan Pharmaceuticals (NASDAQ:TTNP) has recently decided to sell shares and convertible preferred stock to enhance its financial situation. As a result of this transaction, the shareholders should be careful. Stock dilution could push down the company's stock price even further.

Source: S-1

Product Candidates

Founded in 1992, Titan Pharmaceuticals commercializes its FDA-approved Probuphine for management of opiate dependence. The company has also researched an implantable triiodothyronine product for the treatment of hypothyroidism and potential treatment applications to treat Parkinson's disease. However, as of today, Titan has not obtained the necessary funding to continue those research projects and the proceeds from the sale of equity will be used for the commercialization of Probuphine. Investors should understand the issues of Titan selling Probuphine in order to understand the stock price dynamics.

The image below provides stage of development of Titan's product candidates:

Source: titanpharm.com


Probuphine consists of a six-month buprenorphine implant intended for the patients who received a clinical stability with 8 mg per day of oral buprenorphine. Further details were provided by the company in the following lines:

Probuphine is a continuous drug delivery system consisting of a small, solid rod made from a mixture of ethylene-vinyl acetate, or EVA, and a drug substance. The resulting product is a solid matrix that is placed subdermally, normally in the inside part of the upper arm in a simple physician office based procedure, and is removed in a similar manner at the end of the treatment period. The drug substance is released continuously through the process of dissolution resulting in a steady rate of release generally similar to intravenous administration avoiding the fluctuating peak and trough levels of oral dosing that pose problems in many disease settings." Source: S-1

This article was written by

Villamayor Capital profile picture
Former hedge fund analyst, I look for companies growing at a large pace as well as arbitrage and event-driven opportunities.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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