How To Play BioLineRx In 2020

Summary

• Shares of BLRX have lost more than 70% in 2019 and more than 90% over the last five years.
• Investors’ sentiment and confidence in management appear to be at an all-time low; even good data and significant pipeline progress last year have been sold off.
• The company’s current market cap roughly equals current cash levels; its excellent pipeline with late-stage assets is practically valued at zero and priced for failure.
• Meaningful catalysts (important data readouts and possible licensing deals pending positive results) should send the stock higher in 2020/21, but possible dilution in 1H at depressed price levels before the most significant readout later this year might weigh heavily on the stock price.

Introduction

A recent debate on Stocktwits between two posters (let’s call them “Moon Guy” and “Funny Guy”) inspired me to write this article and reflect upon how to play BLRX in 2020 given that my small starter position I initiated back in 2019 is down about 60% and the stock has performed very poorly last year.

“Funny Guy” avoids companies with a track record of questionable management decisions, reverse splits and dilution after dilution, while “Moon Guy”, despite being down significantly, still believes the company will make a comeback in 2020/21 and therefore intends to accumulate more shares throughout the year.

So, how to play BLRX in 2020? Before I answer this question, let me provide a brief overview of the company’s situation and last year’s performance.

Stock performance in 2019 – “The bad and the ugly”

After doing a disastrous equity offering plus warrants (at $0.55 (pre-RS) with the same amount of five-year warrants exercisable at $0.75) with an 25% discount to the market price in February, and after doing a 1:15 Reverse Stock Split in June without supporting it with significant news, shares of BLRX lost around 70% of their value in 2019, despite tremendous progress on the development of its pipeline.

Evidently, distrust in management that has shown ill judgment and bad timing as to financing has led to a death spiral that destroyed a considerable amount of shareholder value.

BLRX 1Y Chart

Source: Yahoo! Finance

Overview/Pipeline

BLRX is an Israel-based, clinical-stage biotech focused on oncology indications.

Its lead candidate is BL-8040, a cancer platform drug and CXCR4 antagonist with orphan drug designation for multiple indications currently evaluated in a Phase 2b study in AML consolidation therapy, in a Phase 3 trial for stem cell mobilization for autologous transplantation, and finally

Analyst’s Disclosure:I am/we are long BLRX. 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.