Our view on Artelo Biosciences (ARTL) is mainly a trade opportunity for now, in which after giving a basic overview of its tech platform, we will show our bullish trade thesis on the chart. In a nutshell, this company has a lot of warrants tha strike at $0.75 cents and $7 a share. We think this gives this play a ton of room for upside as we have seen many of these "cheapies" run a ton over the past year. Please note, we aren't making an investment thesis here, only a trading one for the short term.
ARTL has 3 programs in its pipeline: ART27.13 – a CB1/CB2 agonist picked up from AstraZeneca (AZN) for the treatment of Cancer Anorexia Cachexia Syndrome (CACS), ART26.12 – A Fatty Acid Binding Receptor 5 (FABP5) inhibitor studied for the treatment of prostate and breast cancers, and ART12.11 a co-crystal formulation of Cannabidiol and Trimethoprim for PTSD. Of these, we are particularly interested in the ART26.12 preclinical program licensed from Stony Brook University in NY. The program is supported by two grants – $3.8M from the NIH and $4.2M from the NCI.
FABP5 is a compelling target, particularly in the metabolically aggressive TNBC subtype, where it has been demonstrated to be a strongly negative prognostic indicator and can promote metastatic escape. Interestingly, this study found extremely strong correlation between EGFR (which is highly expressed in TNBC) and high FABP5 expression (P < 0.001). The authors claim FABP5 stabilizes EGFR and prevents its proteasomal degradation. An alternative pathway proposed for FABP5 in TNBC is through the competition with CRABP2 for the binding of retinoic acid, preferentially signaling PPAR-beta over RAR and promoting tumor growth and resistance. Patients with a high tumoral CRABP2/FABP5 had significantly longer overall survival (P = 0.0051).
In prostate cancer cell lines, the compounds developed by Stony Brook have demonstrated both single agent and synergistic activity with docetaxel, a commonly used chemotherapy for both breast and prostate cancers. Though the program is still early, the company has expressed interest in accelerating its development and running IND enabling studies next year. It is a compelling speculative target with dramatic upside from current valuations.
Technical Chart analysis (click on chart to enlarge and view in high resolution):
We have added white lines to explain where we think this chart is headed. The stock right now is right at the first warrant strike of $0.75. As we can see, the pps has been steadily rising with 6 valleys marked in the white u shapes. Accumulation/distribution is trending in the right direction with bollinger bands indicating a hard break is coming up here shortly in our opinion. However, we need to pivot away from the $0.78 range with volume in order to get the big break out we are looking for.
We also mark the green volume days as well, showing how the volume trend seems to us to be a subtle short cover underneath the $0.75 first warrant level. We think this play has several rally price points up to $2.50 a share.
First level would be right at the 200 SMA of around $0.98 cents. If the company releases a significant PR, then we think we can hit the next level of $1.20 to as high as $2.50.
Downside we see here would be around $0.55.
This one is an interesting play here as the so-called "Pot Stocks" have been on a nice roll lately. While this one is potentially a lot more than just a pot stock, it's basically more know for as such.
Perhaps once the company can straighten out the warrant coverage and financing, we could like it more than just a trade because its tech is very interesting with strong speculative rationale. However, for now we see it strictly as a short term upside breakout trade.
Consider a stop under $0.55.
Consider adding over $0.65
Sell level 1, $0.98
Sell level 2 $1.20
Sell level 3, $1.48
Sell level 4, over $2.
As mentioned above, there are also warrants at $7, so the warrant holders might try to play a 'middle trade' between $0.75 and $7 which could take this one to near $3.
If we get the rally here, consider a rising stop and trail selling.