Greenwich LifeSciences Stock: Insider Buying And Buybacks

Doctor"s appointment

AleksandarNakic/E+ via Getty Images

Investment Thesis

Breast cancer has one of the highest death rates for women in the United States, and is the most commonly diagnosed cancer for American women. It is estimated that about 1 in 8 women will develop invasive breast cancer over the course of their lives. Currently, as of January 2022, there are more than 3.8 million women with a history of breast cancer in the U.S, including women who have finished treatment, according to facts from Breastcancer.org.

Greenwich LifeSciences has an immunotherapy in its pipeline known as GP2, which targets patients who have had surgery for breast cancer and are trying to avoid a recurrence. The long-term revenue possibilities for this potential treatment are staggering, with an estimated market size of $10 billion by 2025. With Phase III trials approaching, management seems extremely confident in GP2 as demonstrated by recent insider buys, an extension of the lockup period, and the announcement of a share repurchase program. A buyback program is virtually unheard of for a company of this size and with a Phase III trial just getting underway. A speculative investment in the company could end up paying off extraordinarily well, should the Phase III trial achieve success. However, there are many risks to consider, and the conclusion of the trial is still years away with a lot of uncertainty in the mix.

Background Information

Back in late 2020, Greenwich LifeSciences (NASDAQ:GLSI) published a poster on their GP2 treatment, which showed the five-year follow up survival curves for patients and results from the Phase IIb trial. Some key takeaways from this were a triggering of the immune response from early injections, and most importantly that the treatment lowered recurrence rates of cancer to 0%.

This understandably put GLSI on the map, and the stock experienced an intra-day pop of over 2000%, which is highly unusual even for a small biopharmaceutical company. A short time later the stock price corrected, but was still up close to 1000% on the news.

GLSI stock

All Time Chart of GLSI (Seeking Alpha)

Since the massive upward move based on Phase IIb results, the stock has sold off about 70% from the recognizable highs of $56.00 per share. A bottom was reached around $15.50 in early 2022, and the stock has started to see buyers appear above the $16 mark. This puts Greenwich LifeSciences market capitalization roughly at $222 million at this time of writing.

While there is still much uncertainty surrounding the GP2 treatment, the Phase III clinical trial, dubbed Flamingo-01, is now registered on clinicaltrials.gov with identifier NCT05232916 as of March 2nd, 2022. More details are available at the above link, including trial design, sites, and additional information. Earlier this month, management was in attendance at the American Association for Cancer Research (AACR) Annual Meeting in New Orleans, with two new posters covering additional findings from the Phase IIb trial and also updates on the upcoming Phase III trial. These two posters have just been posted online here, with data further supporting the role of GP2 in preventing breast cancer recurrence.

Please keep in mind that this is still a developing story, and while the Phase III trial is coming, the results and conclusions are still years away. Trials can take much longer than some market participants may be prepared for, and each investor should understand that when treatments are reviewed by the FDA, there may be unexpected delays, and in turn consequences for the stock of a company.

Greenwich LifeSciences intends to file additional patent claims surrounding the manufacturing of GP2, and if these are issued, there is potential to extend the life of the patents beyond the year 2040.

It is estimated that the potential market size for this type of immunotherapy is massive, at or exceeding $5 billion, with expectations for a market size pushing $10 billion by 2025.

Greenwich LifeSciences CEO, Snehal Patel commented:

The poster presented at the SABCS is important because the Kaplan Meier survival curves and demographic data further validate our promising HER2 3+ Phase IIb data and support our plan to commence a Phase III trial… Recurring breast cancer affects 1 in 8 women. Approximately 50% of women with recurring breast cancer do not respond to Herceptin or Kadcyla, resulting in metastatic breast cancer and a poor prognosis. Approximately 80-85% of metastatic breast cancer patients do not survive.”

Source: Greenwich LifeSciences Press Release

Insider Buying, And Extension Of The Lockup Period

In February of 2022, it came to my attention that insiders of Greenwich LifeSciences were buying up shares of their own company.

GLSI Insider Buying

GLSI Insider Buys (Open Insider)

As GLSI broke down to the $20 level in January 2022, Snehal Patel, who serves as both the CEO and the CFO of the company, began buying thousands of shares. Around the same time, the Chief Medical Officer and the VP of Clinical Affairs also began purchasing shares at $19.99. While these initial purchases are small, they represent a willingness to buy shares in a turbulent market, and this caught the attention of investors.

The market launched into full-on panic mode surrounding Russia’s invasion of Ukraine, and rising interest rates spurred on the selling of many risk assets, especially speculative ones such as GLSI. The price started to break down even further below $18, and even into the low $16’s. At this point, other directors in the company started to nibble at the shares, with small purchases near the bottom. After a period of volatility, the price started to move back up, and as we can see in the above chart, the CEO bought even more at prices of $19.59 and $19.80.

There are countless reasons why one might sell stock in a company. However, there is only one reason why one would buy shares in a company – they believe that the shares are undervalued and could appreciate greatly over time.

While management did take advantage of the late 2020 price run-up and offered additional equity to the markets at $40 per share, they have now made an about-face by announcing an extension of the lockup period and a new stock buyback program. In my opinion, these moves by management show a great deal of confidence in GP2, and also demonstrate a smart use of working capital. It is extremely unusual for a microcap company with a low share count to be announcing a buyback program, especially one that is just rolling out a Phase III trial with a great deal of uncertainty in the mix. While some may see this development as inherently risky, I believe that it makes the company stand out from the crowd in the industry that it is in.

The Buyback Program And Skin In The Game

While the company announced a share repurchase program at the start of this year, the maximum allowed under the program is $10 million. Compared to the company’s market capitalization of $222 million, this is a little under 5% of the company. Significant? Possibly, but it could spell disastrous if the Phase III trial is unsuccessful. This remains a substantial risk to keep in mind as time goes on.

The term of the repurchase program is up until March 31st, 2023, which is just after when the lockup period will expire as well (March 24th, 2023). It will be interesting to see how the company’s pre-IPO investors react to this development, but many seem to be okay with waiting another year as the trials progress and patents are potentially issued.

Additionally, there is major skin in the game for the CEO, Snehal Patel, who is the largest shareholder at around 60% of total shares outstanding. This amount of investment, combined with a willingness to be buying back shares instead of selling, shows a high level of conviction. The general public, including retail investors, own around 16% of the company and it seems as though most hedge funds have not caught on yet.

GLSI stock insider ownership

Insider Ownership of GLSI (Simply WallSt)

Some institutions have caught on, however, as recent information has been made public in regards to institutional investors buying GLSI stock. OLD Mission Capital LLC purchased a new stake in the company during the 3rd quarter worth approximately $287,000, as did Tibra Equities Europe, with buys of up to $496,000. Other institutions have purchased smaller amounts in the last few quarters, and I suspect that we may see more buying as the share price falls further below $17.

As seen in the above graphic, only 6.2% of shares outstanding are currently held by institutions. I suspect it is due to the speculative nature of the company and the “binary outcome” associated with the upcoming trial for GP2. However, the institutional ownership is not even close to zero, which is a good sign that the company has inspired confidence in others so far. Insiders other than the CEO do in fact have considerable skin in the game, owning roughly 17.5% of the company, and this is actually slightly higher than the general public at this time.

Forward-Looking Statements, Vast Revenue Potential

For a company with no approved products yet and only projections of a total addressable market, the future revenue estimates are wide ranging. While new data coming out regarding GP2 seems to further support the efficacy of the treatment, there is no guarantee that it will go on to solidify a place in the market. However, with an expected market size of nearly $10 billion by the time the Phase III trials conclude, Greenwich LifeScience’s GP2 treatment has potential to be used synergistically alongside other drugs, such as Herceptin, Kadcyla, Perjeta, and Nerlynx.

Herceptin had approximately $2.9 billion in sales during the 2021 calendar year, while Roche’s (OTCQX:RHHBY) Perjeta and Kadcyla each had $4.2 billion and $1.9 billion for the year 2020, respectively. Analysts are forecasting growing sales from these drugs in the coming years, with annual sales growth to begin tapering off by 2026. These three drugs alone account for nearly $9 billion in total sales which GP2 may be able to piggyback on after the Phase III trial concludes, and this sets a good frame of reference for estimating sales.

Greenwich LifeSciences has vast potential, as it is estimated that the company could reach between 6% and 30% of new breast cancer patients, as well as breast cancer survivors. This would mean upwards of tens of thousands of new patients per year, with recurring revenue annually as GP2 targets 11 doses over a three year timeframe. This treatment could become a viable long-term option for breast cancer survivors, and as the number of patients grows over the coming decade, so does the total addressable market. The company intends to match similar drugs in pricing, between $75,000 to $125,000 per patient.

New breast cancer patients are estimated at around 266,000 per year. A 6% market share would equate to around 16,000 patients per year, with a high-end estimation at around 80,000 patients. It is not likely that the high-end estimation will be achieved over initial years, but even with half of that addressable market, the revenue potential is in the $2-7 billion range (at the low end of pricing). Factoring in the higher-end treatment prices per patient and the revenue opportunities become truly staggering, hitting close to the forecasted $10 billion revenue number with increased market size.

Risks And Things To Keep In Mind

Greenwich LifeSciences is a microcap biopharmaceutical company, with only 12.9 million shares outstanding as of April 12th, 2022. The nature of these types of companies with low share counts often mean illiquidity, and that bid/ask spreads can be large, with prices fluctuating seemingly at random and with high volatility. Another thing to keep in mind is that GP2 and the upcoming trials carry a lot of weight, as the “binary outcome” mentioned earlier means there is a high level of risk for investors. The conclusion of the Phase III trial is also years away, meaning that shares of GLSI will be highly volatile for the foreseeable future as updates are shared with the public.

Either the company will emerge victorious showing a major breakthrough in the treatment of breast cancer, or the future prospects will fizzle out, and management’s buybacks will be all for nothing. The company’s value essentially depends on one upcoming clinical trial, and for this reason investors should only commit however much capital they are willing to lose, up to 100% of their investment. I personally have a very small “tracker” position in GLSI at the moment, as short interest has now risen above 10% and market volatility could continue to push the shares lower.

Due to the speculative nature of the stock, an investment in the company should only be considered by those with an above-average risk appetite. There are additional risks to consider for investors, and some of these risks include: potential issues regarding financing activities, dilution of shareholders from equity offerings, inadequate capital to execute on the company’s business plan, and inability to compete with larger companies in the same realm. Even if GP2 reaches market after successful Phase III trials, there is no guarantee that forecasted revenues will be realized for the company in the future.

Conclusion

Greenwich LifeSciences is an extremely interesting, lesser-known company with vast potential in their GP2 immunotherapy for treating recurrence of breast cancer. With Phase III trials quickly approaching, insider buying, the extension of the lockup period, and the announcement of a stock repurchase program, the company could once again be put on the map and attract new investors. Management’s level of conviction is made apparent due to extremely high levels of insider ownership, as well as recent insider buying, which could be telegraphing big things ahead. It is virtually unheard of for a small-scale microcap company to announce a buyback program, let alone a biopharmaceutical company with an upcoming Phase III trial and a large amount of uncertainty. While this strategy from management could be considered risky, in my opinion, it shows a high level of conviction in the GP2 treatment, and a speculative investment in the company could end up paying off extraordinarily well for investors over the long-term. The revenue opportunities for the company are estimated to be in the $2-7 billion range with potential to expand to nearly $10 billion over time, as the GP2 treatment could become a viable long-term option for breast cancer survivors. I currently see the shares of GLSI as a Buy on weakness, or a Hold, but only for those with an above-average risk tolerance.

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