Hepion Pharma (NASDAQ: HEPA) jumped 118% yesterday and has fallen back some 10% premarket this morning. The base observation would e that yes, the news on the drug trials yesterday was exciting, but not, perhaps quite as exciting as some thought. This is not unusual of course stock prices often enough do overshoot in either direction on the announcement of some price changing news. The trick of trying to trade that observation is don't of course - because it's never obvious ahead of time when the price change is going to reverse.
Hepion is a pharma development company as is obvious from the name. The specific news was that: “Hepion Pharmaceuticals' (NASDAQ:HEPA) non-alcoholic steatohepatitis (NASH) candidate rencofilstat met primary and secondary endpoints in a mid-stage trial.” The thing about modern drug trials is that before you do them you've got to agree with the regulator what you're expecting to see. You've got to define what success would be before you're allowed to do the testing. So, what is really being said there is that the trials showed that the drug does what Hepion thought it would do.
This is not the end of the process though. It's now necessary to do Phase III trials to prove that it works in a wider population and with few to no side effects. There's still a considerable way to do in this development process that is.
Hepion Pharma stock price from NASDAQPassing such a test is indeed a valuation event. Failing it would be one too. The 100% change in the stock price might seem extreme but it's not actually unusual in research pharma stocks when they are able to report success in a trial like this.
The other issue is when is Hepion going to raise money again? Pharma research simply eats shareholder capital and it's entirely usual to come back to market for more of that capital when such a test has been passed. It's possible that Hepion won't in fact do this. We'd not say that Hepion is funded through to possible FDA approval. But on the other hand the current market capitalisation looks lower than the cash at hand inside the company. That's not a position from which folk like to try raising money. From what we can see there're still a few more quarters of runway left from the current finance.
We'd not guarantee this but we'd not expect a Hepion fundraising just yet. Not unless there's a much more significant rise in the stock price.
