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Recent FDA Breakthrough Therapies: Hold Or Fold?

|About: GlycoMimetics (GLYC), RXDX

Summary

Ignyta's secondary offering lockup period expires Aug. 2, 2017

GlycoMimetics secondary offering lockup period expires Aug. 23, 2017

Both companies received FDA breakthrough designation and have seen their share price appreciate over 50%

Thesis:

Monitor the share price of both Ignyta (RXDX) and GlycoMimetics (GLYC) as the tickers approach their secondary offering lockup expiration. Sell RXDX into the expiration due to post issuance share price appreciation and hold GLYC into the lockup as long as the ticker price doesn't materially increase over the coming weeks. 

Ignyta: 

The fundamentals of the company itself have been addressed in other articles from Seeking Alpha. In this moment I am not concerned with the fundamentals of the company but rather how supply and demand forces will change with the new lockout period. 

Ignyta's secondary offering lockup period expires August 2, 2017. Ignyta, ticker RXDX, received breakthrough designation for their drug, Entrectinib (RXDX-101) on May 15, 2017. On May 2, Ignyta issued 12,500,000 shares at a price of $6.15 per share. Since the issuance and breakthrough designation, shares have appreciated $3.40 or 55% to $9.55 as of July 30, 2017. 

With a current share price of $9.55 and a market cap of almost 519 million dollars, Ignyta has 54.3 million shares outstanding. The stock has traded about a 600k shares a day over the past 10 days (Yahoo). 12.5 million shares is about 24% of the float and about 20x the recent daily volume. 

The increase in supply compared to the recent volume and shares outstanding make me believe that in the coming weeks, investors could see an opportune buying opportunity to initiate or add to a position. This coming week could also be an ideal time to take profits in one's RXDX holdings in anticipation of a cheaper share price.

GlycoMimetics:

GlycoMimetics ticker GLYC is another oncology play that received breakthrough designation and coverage from the Seeking Alpha crowd.

On May 15, 2017, 2 days after Ignyta, GlycoMimetics was also granted breakthrough designation for GMI-1271. Since the designation, shares of GLYC have appreciated $6.42 or 120% as of July 30, 2017. With a current share price of $11.79 and a market cap of 363.79 million dollars, GLYC has a float of 30,855,810 shares. 

On May 23, 2017, after the breakthrough designation, GlycoMimetics issued 7,000,000 shares at a price of $11.50. GlycoMimetics should have a secondary offering lockup period that ends August 23, 2017. As of today, GLYC is only trading at a 6% premium to the what the shares were issued at.

The 10 day volume has been about 300K shares. (Yahoo) So, towards the end of the mouth GlycoMimetics will see itself in a similar position to Ignyta. We will see a post lockup period release of shares that is equivalent to about 20% of the float and about 20x the daily volume. 

However, because (GLYC) was able to issue shares, after the breakthrough designation, their share price has not appreciated much when compared to the price they recently issued shares. 

Conclusions

The month of August will see two different oncology plays that:

1) Received FDA-breakthrough designation;

2) have appreciated materially over the past 3 months;

3) and issued new shares that will come to market out of a lockout period.  

However the lockout period should treat each company differently. Ignyta issued shares when the ticker was trading 55% below current values indicating that there is profit to be taken in this company.

GlycoMimetics issued shares after their breakthrough designation. At this moment, the ticker has only appreciated 6% since the shares have been issued. Currently, GlycoMimetics seems like a safer hold than Ignyta. 

Disclosure: I am/we are long RXDX, GLYC.

Additional disclosure: I/we may liquidate a portion of our RXDX holdings over the next 72 hours.