Genprex Inc. Nasdaq: GNPX Short Report, January 23, 2020

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Intro:

Over the last two days GNPX’s share price has a seen a near five-fold increase, daily trading volume has exceeded 50 million (over three times the number of outstanding shares) and daily RSI (14) has breached 90. As usual, this short report will look into some of the red flags this ticker raises. They include: lead drug candidate and key members of management taken from a bankrupt/failed business, dwindling cash, worsening dilution issues and an institutional investor with links to an alleged pump and dump ring.

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Security Details:

Symbol: GNPX

Current price: $ 1.90

Outstanding shares: 19 million

Market Cap: $17.1 million

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Company information:

Genprex describes itself as “a clinical stage gene therapy company developing a new approach to treating cancer, based upon our novel proprietary technology platform, including our initial product candidate, Oncoprex™ immunogene therapy, or Oncoprex”.

Oncoprex has been the company’s lead candidate drug since it became publicly listed in late 2017. However, Oncoprex much like the key members of Genprex, have been around for nearly two decades. Simply put, Genprex and its products are little else than the “recycled waste” of what was left over after Introgen’s massive failure. Introgen declared bankruptcy in 2009 after raising over $700 million in investment and facing accusations of misleading investors. Genprex went on to assume control of some of Introgen’s intellectual property which included TUSC2, a gene that is foundation of Oncoprex, and was first licensed by Introgen back in 2001.

TUSC2’s intellectual property was far from promising as it was legally abandoned in Introgen’s bankruptcy because “the patents are a burden on the debtors, provide no value to the debtors, and are of no interest to the prospective purchasers, the debtors seek authority to abandon the patents” (1). It is also worth noting that Rodney Varner, Chairman and CEO of Genprex was Introgen’s general counsel and corporate secretary (2)and Jack Roth, Chairman of Genprex’s Scientific and Medical Advisory Board was previously Chairman of Introgen’s Scientific Advisory Board (3).

Note: Much of the above info was taken from Hindenburg Research’s report on GNPX from May 2018. (4)

Recent News:

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Financial Highlights:

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Given the company’s strong ties to a failed business it should come as no surprise that financials are far from pretty. Cash in hand has been steadily decreasing since 2018 Q2 when it stood at $12 million, it amounted to little over $2.5 million at the end of 2019 Q3. This has been largely the result of the company’s steady losses, which have averaged over $2.7 million over the last three quarters. Therefore, the company should be running out of cash very soon. It should also be noted that there are currently over 19 million outstanding shares, meaning that they have increased by around 8 million during 2019, a clear indication of dilution problems that will likely get worse before they get better.

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As expected, the company filed a prospectus supplement on November 20, 2019 stating it was offering 2.17 million shares at $0.40 per share and another one on January 16, 2020 stating that it had sold 961,000 shares at $0.24 per share. More announcements of this sort should be expected soon as the company still needs cash to stay afloat for the foreseeable future… and also because it registered for sale an additional $25 million worth of common stock, preferred shares, debt securities and warrants on September 13, 2019 (5). It came into effect shortly afterwards on October 28, 2020 (6). The potential for dilution is massive given how serious GNPX’s liquidity problems are.

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An institutional investor tangled up in some dodgy dealings:

Hudson Bay Capital is a name that pops up often in our research so we were not surprised to find a Schedule 13G filing stating that it holds over 1.1 million GNPX warrants (7). Not only has Hudson Bay Capital been involved with other dubious tickers such as RKDA, BLIN, RIOT, SNES, TRNX and DMPI (among a few others), but it has also been named in the SEC’s stock manipulation case against small cap investor Barry C. Honig for allegedly being part of the Team Honig pump and dump ring. In a lawsuit filed in Superior Court of California, MabVax Therapeutics Holdings details how New York-based Hudson Bay Capital played a pivotal role in inducing the company to go public via a reverse merger so that Barry Honig and his crew could take control of the board and manipulate the stock. For more details please check Teri Buhl’s excellent article on the matter (8). This not the first time Hudson Bay has been in trouble with the SEC as it was previously found violating regulation M (9).

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Paid promotion:

Undoubtedly this is easily the biggest red flag GNPX raises. Throughout the last few days several promotional email newsletters have been circulating. One of these newsletter, Small-Cap Street LLC, clearly states that they have “been compensated twelve thousand dollars cash via bank wire by venado media llc for this weeks coverage of GNPX”.

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Red Flags:

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Opinion:

GNPX is not a good investment. Its lead candidate is old and ineffective. Its financials are going from bad to worse. Dilution has become an issue and it will worsen. A “vulture fund” with links to an alleged pump and dump ring has got its hands on a fair amount of warrants. And last but not least, paid promotion relating to the company has taken place recently. Stay away from this ticker unless you are an experienced trader.

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