Interpace Diagnostics Group Inc (NASDAQ:IDXG) is all over the place right now. The company announced at the start of the week that it as picked up some coverage on its lead asset (well, one of then), and started to run on the back of the news. Shares kicked off the session on Monday in and around the $2.15 mark, and by the day’s close, more than 56 million shares had traded hands to boost Interpace to circa $2.8 a share. A 30% run, and at close, it looked as though the good news was going to filter through to the subsequent session and keep the company in the green.
Then, management filed this 8K.
The filing details the exchange of a March senior secured note for an April senior secured convertible note, and while the 8K details a number of terms that aren’t overly relevant to longer term value, the key point is that the convertible has an associated fixed conversion price of $2.20.
When you’re looking like hitting a $3 share price, something that’s guaranteed to kill the run is the release of some news that outlines a convertible priced at a more than 20% discount to current price. Sure, there are a few provisions tied into the note to try and make it seem a little sweeter, but bottom line – it’s a dilutive announcement.
We’re not done, however.
As per this most recent news. Interpace has now let markets know that it has eliminated all of its outstanding secured debt. Secured debt, mind. This company isn’t debt free. This, of course, is a natural progression from the 8K, and a natural implication of its actioning, but to press release the news (but not the 8K contents) is a little strange.
In other words, we’ve had great news, terrible news, positive spin news.
To give credit where it’s due, the positive spin has translated to a recovery, and the Interpace rollercoaster continues to run. The company is currently trading for around $2.75 (mid session on Thursday) – a close to 10% premium to the Wednesday close.
So what happens from here?
Well, it’s anyone’s guess. We’ve covered this one on a few occasions in the past, both pre and post split, and each time we’ve noted that the real catalysts are going to be progression on the insurance front, and the implications said progression has for sales forecasts. For those not familiar with the stock, the sales we’re talking about, and the coverage, is associated with the company’s two lead diagnostics assets – ThyGenX, which assesses thyroid nodules for risk of malignancy, and ThyraMIR, which assesses thyroid nodules risk of malignancy utilizing a gene expression assay. These assets are the value drivers right now (and for the foreseeable future) and that’s why they’re our primary focus.
And what does recent activity say about said products and associated sales?
Well, increased coverage is great, of course, and opens up a fresh target population for the two above noted products. It’s tough to quantify impact, however, and we’re relying on management for guidance in that respect. Luckily, said guidance should come near term. Interpace is set to put out its latest earnings report at some point between May 10 and May 15 (as per guidance). Alongside the report, we should get a business update, and with any luck, a conference call. We’re watching both of these two aforementioned events carefully to see how the company expects latest developments to feed into forward revenue collection potential.
We’re also expecting some pretty good top line numbers from the earnings release itself, and this paints the potential for some speculative volume inflow and – by proxy – some upside momentum subsequent to the report.
We’ll close this out by reiterating what we started with – the action we’re seeing is a bit strange, and it’s tough to look past the odd release timing that’s caused the stock to yoyo over the last week or so. As such, caution is advised. That said, a short term position ahead of the earnings release might be a nice quick turnaround trade.
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Disclosure: We have no position in IDXG and have not been compensated for this article.