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Is Resverlogix Trying To Annoy Retail Shareholders?

|About: Resverlogix Corp. (RVXCF)
Summary

The company has set an expectation that their pivotal BETonMACE phase 3 trial will be wrapping up in April 2019.

If history is any indication that expectation should perhaps be taken with a large grain of salt.

Insider owner Shenzhen Hepalink continues to step up and provide the financing needed to keep the company operating.

Disclosure

I like to get my bias out of the way right off the bat.  

I am a shareholder in Resverlogix which trades in Canada with the symbol RVX.TO  or (OTCPK:RVXCF) and hold what for me represents a very significant position, in fact its my single largest holding. As such anything I write should be viewed as having bias and consequently this blog posting should be viewed as being for entertainment purposes only.

While I endeavor to ensure that any data and information posted is factual I make no guarantees to that effect and recommend that readers verify any and all information posted.

I am not a registered investment advisor and stocks comport significant risk. Engagement of a professional is strongly advised before making any investment decision.  I am receiving absolutely nothing in terms of compensation for this posting, it simply reflects my honest opinions.  

BETonMACE - When will it end?

In a recent presenation at the 31st Annual Roth Conference, the company's CEO Donald McCaffrey stated that the trial is expected to reach 250 Major Adverse Cardiac Events (or MACE for short) in April 2019 which will result in the trail being "wound up".  Here is a link to that presentation for those interested.  

31st Annual ROTH Conference

The presentation is about 30 minutes in length with the April projection for BETonMACE reaching 250 MACE occuring at about the 1:05 mark.  An investor piece by Zack's Analyst John Vandermosten picked up on the April expectation and made it the subject of an updated report: 

https://scr.zacks.com/News/Press-Releases/Press-Release-Details/2019/RVX-BETonMACE-Final-Event-Expected-April-2019-article/default.aspx  

Should Investors Expect BETonMACE to be wound up this month?

I sincerely hope this pivotal Phase 3 trial wraps up soon, as an investor of 5+ years it has been a long wait.  It is my belief that if Apabetalone can show robust numbers in terms of Relative Risk Reduction of narrowly defined 3 Point MACE, that the potential for explosive gains is very real. 

On top of the primary MACE reduction endpoint for Diabetic patients, there are subsets of patients with Chronic Kidney Disease and reduced cognitive function.  If Apabetalone shows the potential to also treat patients suffering from Kidney and Alzheimer's diseases, then I genuniely think the sky could quite literally be the limit.

However it should be noted that the April projection for the attainment of 250 MACE and the winding up of the trial, it is just that, a projection.  This represents a 'forward looking statment' and as such it is considered non-material.  

In point of fact I consider it a very strong possibility that the company will not announce reaching 250 Events in April.  I'm actually expecting to hear crickets as April rolls into May.  Further, if they do not meet this expectation I also anticipate that the company would be completely silent as to the reasons, both beforehand and immediately after.

Why?  Why would the company set an expectation and then fail to update the market and shareholders?  I don't know, but to use a populuar turn of phrase, 'its how they roll'.  

A long history of setting expectations and failing to meet them

I could write an almost exhuastive post about all the times the company has communicated forward looking expectations and then failed to meet them.  

When the BETonMACE trial started shareholders were told that there was to be a Futility Analysis done at the halfway point, after 125 events.  There was much anticipation of this FA in the investor forum Agoracom.com where I participate with the username growacet.  However we were disappointed.  

Agoracom: Small Cap Investment - Resverlogix Corp. - Official Investor Hub

Some time after the planned FA was abandonned the company stated that it would be conducting a Sample Size Recalculation Analysis, or SSRA for short. The SSRA was slated to take place after reaching 75% of the 250 MACE, or 187 events.  In this PR it was projected to be done sometime in the first half of 2018:

News - Resverlogix Corp.

Again however, and not until the second half of 2018, the company announced that they had decided against doing an SSRA because it could penalize the trial.  

Back in September and then again in November of 2018 the company was projecting that BETonMACE would reach the 250 Events needed for completion sometime around the end of 2018, or the start of 2019.  Early this year that was changed to H1 2019, and now to April 2019.

Most recently, at the end of January, the company announced having obtained financing from the company's largest shareholder, Chinese Pharma Shenzhen Hepalink.  In that PR the company announced that they anticipated announcing one or more further subscriptions within 30 days. 

February and March both went by without any news, and then on April 1st 2019 the company disclosed that Shenzhen Hepalink had once more stepped up for roughly 4.5 million more equity units, with other investors purchasing about .6 million.  

I wrote at the start that the list could be exhaustive, in previous years the company has been scheduled to attend investor conferences and then not not shown up with no explanations given either before or afterwards.

Does it matter?  Why and why not.

Okay, so the company has a history of setting expectations and then failing to meet them.  According to my understanding of Safe Harbour (Canadian spelling) these are non-material matters and thus are not to be relied upon in any case.

While that is true I believe it would be naive to expect that continually setting expectations and then failing to meet them, that it would have zero impact on investor sentiment.  And quite likely on the market's valuation of Resverlogix. 

Considering the company's current financial state one would probably expect that supporting the PPS would be in the company's best interests.  After all their SEDAR filings include disclosure of a "material uncertainty" as to the company's ability to continue as a going concern. 

Fortunately Chinese Pharma and insider owner Shenzhen Hepalink keeps stepping up, providing the company with much needed capital.  Their ownership position is now around 40%, 43% or so on a fully diluted basis if warrants are factored in.

A True Contrarian Play

Everyone likes to think of themselves as a contrarian, running in the opposite direction from the herd.  You see it all the time on social media, when some company that is doing anything and everything it can to attract investment starts to see its share price falter pumpers pull out that all too familiar bromide:  "BUY WHEN OTHERS ARE FEARFUL".

Resverlogix in my opinion does not come close to being a company doing all it can to attract retail investors, quite the opposite in fact.  Fiduciary duties compel them to act in the best interests of shareholders, and it does appear to me that Apabetalone has genuine potential to be a monster drug.  

But against the back drop of Apabetalone's incredible potential is a company that:

  • Has disclosed a material uncertainty about its ability to continue as a going concern
  • Is in need of near constant financing with a loan that mandates a minimum cash balance of $5 million be maintained.  
  • Continually sets expectations and then fails to meet them

Thankfully and perhaps most importantly, insider owner Shenzhen Hepalink continues to step up and provide the financing needed to keep the company operating and moving forward.  

If the company raised enough capital to dispense with the 'going concern' disclosure and engaged in a more proactive manner in terms of its communications, then perhaps the PPS would be higher than the current $3.30 or so CDN or $2.50 USD.  But then Shenzhen Hepalink would probably be paying more for the equity units they keep subscribing to.  

We shall see how it plays out, whether the trial wraps up in April or sometime later, results are getting closer and closer with each passing day.  If BETonMACE hits a home run then it all will have been worth it.

Comments of course are welcome

Disclosure: I am/we are long RVXCF.