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RPRX Death Spiral

|Includes: Repros Therapeutics Inc. (RPRX)

The downfall of RPRX share price is a death spiral for Efficacy. It is hard to see how Efficacy can save their substantial investment. Efficacy’s actions on the tanking of RPRX will speak to their willingness to revive the dying RPRX. 

RPRX fought off Efficacy’s investment with repeated amended standstill agreements. The primary reason for this was to keep the power and authority within the hands of Podolski. Podolski, recall, was the company President and CEO prior to the takeover by Efficay. Podolski remains as the CEO, but his authority and power have been eviscerated. This is especially clear from the agreement Lammers (current President) signed to come onboard. Lammers once worked for RPRX under Podolski!

Regardless, Efficacy has $30 million invested in RPRX, ~30% of outstanding shares (~4.2 million). By the close of yesterday’s price, Efficacy has lost more than ~65% of its investment value ($20 million). This might improve marginally in the upcoming weeks. However, it might also further decline with more bad news. And there is a host of potential bad news on the horizon.

Many, including so-called noteworthy biotech investment advisors, made a big deal of the Efficacy financing deal last year. There has been no mea culpa by the biggest promoter of this financing deal for their flawed and extremely poor reading of the financing details. What is obvious is Efficacy did not exercise these warrants. If they had, this would have been a strong indicator of RPRX support. 

The lack of exercising the RPRX warrants leads to the conclusion that Efficacy sees no real upside or value. The simple reason for not exercising the warrants is why pay a premium for shares. 

But with the RPRX tanking, Efficacy could perform two goals from buying shares as the fell. The first is to increase their ownership, which from the standstill agreement was allowed up to 40%. The second is to give some support to the falling share price. 

Herein lays the problem and the certain RPRX death spiral. If Efficacy did not buy shares in the RPRX tanking, they have no confidence in RPRX. If Efficacy sold shares the RPRX share price will begin to crater. So, the question is did Efficacy buy shares? If Efficacy bought shares, the RPRX death spiral is slowed and Efficacy appears to be committed to the immediate financing needs. Since there is no SEC reporting, Efficay neither bought nor sold shares.

Efficay needs to save its money to purchase enough shares to provide $6 million. This allows RPRX to hold onto the NIH license. It is hard to imagine the NIH pulling its license agreement, but this clause in the 6th amended agreement is not simply an exercise in negotiations. The amount of the financing will help determine the rate of death, death being inevitable.