What’s Driving Threshold Pharmaceuticals, Inc. (NASDAQ:THLD)’s Wild Upswing?

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Here’s an interesting one. On August 17, 2016, Threshold Pharmaceuticals, Inc. (NASDAQ:THLD) recorded near record volume, with more than 45 million shares changing hands, and the company gained more than 55%. This week, it looks like the run is continuing. Volume is up, price is rising. This is a company that has been lucky to trade 100K shares a day for the past six months. What’s attracting this sudden interest? Right now, there’s no obvious market moving information that would pull the share price up like this. Is there something big around the corner?

Maybe. If so, what could it be? Let’s try and figure it out.

First, a quick introduction to the company. Threshold is a junior biotech with an oncology focus. The company has three clinical candidates, two of which are in phase II trials for their target indications and a third that is currently held up (more about this shortly). The two active candidates are Tarloxotinib, currently under investigation in NSC lug cancer and head and neck SCC; and a diagnostics imaging agent called [18F]-HX4, currently under investigation in a solid tumor indication.

The halted candidate is called Evofosfamide, and until December last year, was Threshold’s lead compound. In December, however, the company reported topline from two phase III trials, and revealed that the drug didn’t meet its endpoints. There are a few ongoing analyses, however, that may indicate some level of salvageability. Specifically, a subgroup of the study – Asian patients in Japan and South Korea – demonstrated a great response, with significantly improved PFS and median overall survival. There’s a chance, based on this subpopulation analysis, that Threshold can push for an approval. Retroactive analysis of biotech data is always risky, but apart from a registration fee, the company doesn’t really have much to lose if it can come up with some sort of pathway to commercialization.

Before the topline hit press last year, this one was part of a collaboration with Merck & Co., Inc. (NYSE:MRK), however the latter reverted the rights back to Threshold at the beginning of this year. A knee jerk reaction suggests this is not a good thing – Merck will have looked at the unblinded data before it made the decision to give back the rights, and this suggests that there’s not much in it. This sort of thing has happened before, however, and it’s not always an indication of inefficacy.

Looking at the other two drugs as potential value drivers, data from the carcinoma trial is due January 2017, so there’s a near term catalyst in that hitting press. The imaging device is not as clear cut, but we expect some details to hit press before the close of the year.

So we’ve got a bit of data due, a potential path to approval based on some Asian sub-pop data and that’s about it. Nothing that justifies these levels of gains. There’s also no sign of promotional activity. Message boards are active, but not by way of a sales push, or so it seems right now. The latest filing is a Confidentiality Treatment notice, giving the conspiracy theorists something to discuss.

We think one of two things is likely. A partnership announcement (most likely) or an acquisition (least likely). If the company can pick up a partner for its Tarloxotinib candidate, it would pick up some well needed capital as part of an upfront payment and secure the continued development of the drug that now looks to account for the majority of the its valuation. A buyout is less likely – the biotech acquisitions space has been pretty flat of late and we think a company would want to get a bit more in the way of confirmation of the mid stage pipeline’s chances of approval before committing a premium – but not impossible, and the breaking off of Merck makes it far less complicated than it otherwise might have been.

We’re watching this closely for clues as to what’s causing the stock to rise. Subscribe below and we’ll keep you updated!

Disclosure: We have no position in THLD and have not been compensated for this article.

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