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Impel Pharma (NASDAQ: IMPL) up 140%, down again 22% - Welcome to Meme World

Random speculation in apparently soon to be bankrupt stocks is that Meme World, right?

Update : 23 Nov 2023, 04:19 PM

Impel Pharmaceuticals (NASDAQ: IMPL) stock was up 140% yesterday during regular trading. IMPL stock also fell 22% after hours. We’d say this is just the hoddlers and meme stock artistes welcoming the company to their world. For Impel seems to be on a fairly fast track to a Chapter 11 bankruptcy and we’d argue that the objective value of the equity is probably zero. Impel does have a real live product, something on sale out there in the marketplace, they’ve gained FDA approval and all that. But sales are lagging behind what can deal with their capital structure. In terms of the actual cash money that they require to keep going they’re running on fumes.

Given the market capitalisation of $8 million or so (the or so depends upon which exact hour you desire to measure at) it doesn’t take much of a change in buying and selling patterns to drive the stock price dramatically. With 127 million shares traded that’s certainly enough to move the price pretty much anywhere yesterday. But, we would argue, that doesn’t change the underlying problem at Impel. Not enough cash and a horribly restrictive capital structure. It needs one of three things. Firstly, a vast increase in prescriptions sold: “To understand Impel’s current position, we have to go back to 2021 when the company went public to secure funding for launching its intranasal migraine drug Trudhesa. The drug snagged FDA approval later that year, succeeding where MAP Pharmaceuticals and Allergan had failed. However, Trudhesa didn’t hit commercial goals, with Impel hoping to sell 70,000 to 85,000 prescriptions in 2022 but closing out the year at 58,400 total.”

Impel Pharmaceuticals stock price from Google Finance

There’s simply no sign at all that sales are growing to the sort of level that will cover the corporate costs. Still a $14 million loss in the most recent reported quarter. Yes, there’s some gross margin on actual sales but they’re getting nowhere near covering overheads.

Then there’s the capital structure: “While the company has now reached the point of seeking alternatives, it was able to amend the credit agreement with Oaktree to stave off possible bankruptcy. The agreement, which had been previously amended in both August and September of this year, has allowed Impel to draw an additional $2.5 million of tranche B term loans, according to Oct. 2 SEC documents. Impel also has the right to draw up to $10 million more in tranche B term loans by the end of 2023 if it hits certain milestones and conditions. The newly revised credit agreement also specifies that Impel needs to do everything in its power to secure equity financing before Oct. 31, 2023. If those potential proceeds exceed $5 million, Impel must apply half to repaying the loans.” As we say, it’s running on fumes. Any capital raise would have to go to paying down that debt. And at the current market capitalisation any capital raise is going to be horribly dilutive of the current equity.

As ever, we can be wrong about such things. But our best guess is that it’s not going to trade out of this. Chapter 11, the creditors gain the assets and the equity goes to zero is our prediction. Sure, playing in meme stocks can be great fun. But it aids to know where the stock is going to end up.

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