Rexahn Pharmaceuticals Inc (NYSEMKT:RNN) Is Splitting, But We're Still Bullish

At the end of March, we asked the question 'Can Rexahn Pharmaceuticals, Inc. (NYSEMKT:RNN) Continue To Run?' as part of this piece. We concluded that the spate of catalysts that are set to hit press over the coming six to twelve months served up the potential for some real movement throughout the remainder of 2017, and that if these catalysts came in as indicative of efficacy for the assets, and in the indications, in question, then Rexahn would likely be trading a a multiple of its current market capitalization by this time next year.At the time of our coverage, the company went for around $0.48 a share. Subsequent to our analysis, Rexahn ran up to reach early to mid April highs above $0.7 a piece. That's not a bad run, but it didn’t last. The company just put out a fresh update, and has given back the gains (and more) at the close of this week.At Thursday's close, and with Friday an off day we can consider this the end of the week close, Rexahn went for $0.46. That's a few percentage points off the price at our last coverage, and close to 35% off highs.Not great.That said, all is not lost. We maintain our bias, and while the update isn’t going to attract any shareholder fanfare, it's not all bad.Here's what happened and what we're looking at.So the announcement, as many reading will likely already be aware, is a one for ten reverse split. It's going to happen at market open on May 5, and it's not all that unexpected. Still, even though shareholders were aware it was in the pipeline, its announcement has resulted in a sell off. Part of this sell off (we're not saying the majority, but a fair chunk) is likely attributable to wider market sentiment driven action. In other words, individuals or institutions that are in Rexahn and are bailing out on the perceived implications (or maybe negative connotations is a better phrase to use) associates with an RS at this end of the biotech space.The rest is a rebalancing action, in anticipation of the fact that, post split, chances are that Rexahn isn’t going to hold its perfect post split price, and presplit holders are going to have to shoulder a bit of dilution. There's also likely a bit of short entry pressure factoring in to the equation.All this is valid from the perspective of a seller, but we've seen countless companies (especially at this end of biotech) split and go on to succeed on the back of the move. Realignment with exchange requirements, visibility to wider markets, the desire to fall in line with min PPS on an institutional capital assessment checkbox – all these things can be valid reasons behind a split, and as such, a split isn’t necessarily indicative of a weak set of underlying fundamentals.And that's the case here, we believe.This company, regardless of PPS or split or anything like that, has a spate of mid stage trials in multi hundred million dollar (minimum) indications ongoing, and a minimum of three should read out between now and the end of 2017.If Rexahn can maintain a split price above a few dollars (we'd love to see it run above $5, or above $0.5 pre-split) then it's going to find itself on the watchlists of funds and smart money that wouldn’t (be able to) give it a second look at its current price. When these funds look at what's to come from a catalyst perspective, and what the potential upside is on these catalysts if they come out as favorable, we expect some loading ahead of their release. This, in turn, should amplify the impact of individual loading we outlined in our last coverage.There's still risk, of course. There's no guarantee Rexahn can maintain its post split pricing, and if it doesn’t, and the company falls back below the dollar mark, then management has basically diluted shareholders by a factor of ten for nothing.We're optimistic about this one, however, and we think there's plenty of opportunity to run, split or not, throughout the remainder of the year.We will be updating our subscribers as soon as we know more. For the latest updates on RNN, sign up below!Disclosure: We have no position in RNN and have not been compensated for this article.