Nexus Biopharma Inc (OTCMKTS:NEXS) is a penny play that we have repeatedly framed with a cautious message over the last several months. While the stock had some upward momentum as of September, there was reason for concern given its place as the focus of the high-profile promotional force, Traders’ Choice Group.
While a massive promotion like this can function as a productive setup, as we noted last time, it also contains a seed of the inevitable meltdown that must come at the conclusion. This is particularly true when you are dealing with a stock that has “no cash, no property, no plant, no receivables, no goodwill, no inventory, and no investments against $93k in liabilities, giving the stock -$93k in Total Stockholder Equity.” That was how we framed this stock in our last update. It has since declined by about 50% in market cap.
Nexus Biopharma Inc (OTCMKTS:NEXS) trumpets itself as biotech based in Montclair, New Jersey that is developing “a revolutionary new weight loss drug that works by adjusting the body’s metabolism to increase the burning of fat by activating the AMPK metabolic pathway, the same pathway activated by intense physical exercise.”
The underlying biochemistry was described in an article in the journal Cell Metabolism by Claire C. Bastie, and Jeffrey E. Pessin, entitled “FYN-Dependent Regulation of Energy Expenditure and Body Weight Is Mediated by Tyrosine Phosphorylation of LKB1”. Cell Metab. 2010 Feb 3;11 :113-24.
According to their materials, “In completed pre-clinical trials of the pharmaceutical activation of this pathway, test subjects showed reduced fat mass with no loss of lean muscle mass, plus a higher rate of energy expenditure, increased insulin sensitivity, increased fatty acid oxidation, improved plasma and tissue triglyceride levels, with lower cholesterol. Upon translation of this pharmaceutical activation to humans, these effects are expected to have a significant impact on obesity and diabetes.”
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The only important new catalyst to come into play since our last update was another $41k in losses on a net basis according to the company’s latest financial report.
According to the Company’s materials, “in completed pre-clinical trials of the pharmaceutical activation of this pathway, test subjects showed reduced fat mass with no loss of lean muscle mass, plus a higher rate of energy expenditure, increased insulin sensitivity, increased fatty acid oxidation, improved plasma and tissue triglyceride levels, with lower cholesterol. Upon translation of this pharmaceutical activation to humans, these effects are expected to have a significant impact on obesity and diabetes.”
The materials go on to state that “Using the most advanced high throughput screening technology, Nexus BioPharma has identified small molecule compounds in a number of discrete chemical structure families that can efficiently activate the pathway. The Company has filed for intellectual property protection on a selection of compounds in a number of discrete chemical backbones.
The Company’s goal is to advance to pre-IND trials in preparation for FDA human trials of a drug that is touted as capable of safely mimicking this effect in humans.” On the positive side, Nexus Biopharma looks to have assembled an excellent scientific advisory team in recent months with very credible membership in all key areas.
But we would caution: there is at present no concrete proof or guarantee that any such drug will ever exist in any form that has sales potential. It may happen. But there is no concrete proof of product-market relationship. There is just a very early stage set of IP and a compelling narrative. It is also true that the target market is an explosive growth space with few perfect solutions at present and may represent an excellent opportunity.
But there is a long road ahead. From their press releases, it would appear that the Company is still involved in Pre-IND activity, and does not expect even to get to filing an IND application with the FDA until the end of next year (2017). These are all points to keep in mind.
The chart shows a dive of about 50% for shareholders of the name during the trailing week. However, NEXS is a stock with a past littered with sudden rips. So traders will need to stay on their toes. Now commanding a market cap of $21.5M, NEXS has minimal cash on the books, which must be weighed relative to an appreciable load ($336.94k) of total accumulated debt. There are still huge holes in this story and any upside relies on tangible positive data or a new very strong push by promoters. We will update it again soon if there is any change in the story. For continuing coverage on shares of $NEXS stock, as well as our other hot stock picks, sign up for our free newsletter today and get our next hot stock pick!