Eleven Biotherapeutics Inc (NASDAQ:EBIO) Is An Oversell Opportunity

Eleven Biotherapeutics Inc (NASDAQ:EBIO) is suffering from an end of the week slump this week as markets respond to some fresh financing news.The company announced late on Wednesday that it was set to issue equity to raise some cash and – as is pretty standard at this end of the sector – the response to the announcement was a selloff. EBIO Daily ChartThe degree to which the company has sold off, however, is a bit overenthusiastic and – in response to what we see as an oversell, there may be an opportunity to pick up some shares at a discount ahead of a longer-term return to pre-announcement pricing.What makes us say this?Well, this is a one we cover quite a lot here at Insider Financial, with the most recent coverage from back at the start of September available here. It's a biotechnology play that, up until the just linked to coverage, had a pretty diverse pipeline spread across a range of indications, including one called Proxinium, which was under investigation for the treatment of squamous cell carcinoma of the head and neck, and another called VB6-845d, an asset that also targets various types of solid tumor cancers and that is designed to be systemically administered.These two assets are off the table right now, however – at least for the foreseeable future.The company announced back in September that it was halting those programs in favor of a 100% focus of its time and assets on the development of a drug called Vicinium. This one is targeting non-muscle invasive bladder cancer (NMIBC) and, as per the just discussed development, is now the de facto lead development asset.And it's in this decision to focus resources on getting this Vicinium to market that we root our long-term bull thesis for Eleven.The thing is, when you're a development stage biotechnology company with no steady stream of income, all the cash you need to fund various development programs have to come from issuing equity. Equity issues are (more often than not) dilutive to current shareholders and – as such – are generally regarded as negative. That's exactly what we've seen here with Eleven; the company has issued equity and sold off as a result.The more programs you are running in parallel to one another, the more you need to dilute shareholders to keep the lights on. By halting the majority of its programs to focus on just one, Eleven has minimized the dilution risk it's asking shareholders to take on when they consider an exposure to the company's remaining development pipeline.So what's going to get the stock going again and help it start running towards its preannouncement pricing?Well, not surprisingly, it's all about the Vicinium program here.Eleven is currently undertaking a phase III investigation into the safety and efficacy of the asset in its target bladder cancer indication and this program is set up for a couple of key readouts near term.It's not slated for completion until the first quarter of 2019, but between now and then there's a three-month readout (which is looking at the response in patients three months after initial dosing) and the potential for six-month readout (although this is likely). The three-month readout is going to hit press during the first quarter of 2018 and – if the numbers hit press as positive – then this stock is really going to run.Add into this that the recent raise will likely be enough to fund the trial through to completion (meaning there's no immediate dilution risk associated with a near-term exposure) and this one looks like an attractive oversell/discount entry opportunity.Check out our previous coverage of this one here. We will be updating our subscribers as soon as we know more. For the latest updates on EBIO, sign up below!Image courtesy of Valery Kenski via FlickrDisclosure: We have no position in EBIO and have not been compensated for this article.