International Stem Cell Corp (OTCMKTS:ISCO) Claws its Way Back to Over $0.10
International Stem Cell Corp (OTCMKTS:ISCO) announced yesterday that the FDA has approved their stem cells for investigational clinical uses. A clearance from the regulatory organs is always a positive sign for medical OTC companies and it’s especially good for entities like ISCO who have spent years in the industry without actually managing to commercialize their technology.
In light of this, the fact that at the end of yesterday’s session, the trading volume stood at more than four times the 30-day average is hardly surprising. The 16% gap up with which ISCO started the day isn’t shocking as well. It’s performance after the opening bell, however, is a bit unusual.
Instead of surging in the right direction and hitting new heights, the ticker proved to be quite hesitant. Indeed, it logged an intraday high of more than $0.12, but it then faltered and closed the session at $0.111 per share – the value registered at the opening bell. 16% in daily gains is not that bad, but in light of the positive news, many people expected to see a lot more. So, why didn’t this happen?
It sounds a bit illogical at first, but ISCO‘s reluctance to make a more significant jump might have something to do with a potential uplisting to NASDAQ. Virtually all penny stock companies want to have their tickers listed on one of the national exchanges and ISCO is no exception. Unfortunately, if they are to meet all the requirements, they’ll need to have a much higher share price and in a letter to the shareholders from Monday, the company CEO, Dr. Andrey Semechkin, said that in his opinion, waiting for it to grow organically isn’t the best call. That’s why he proposed a reverse stock split which will be voted upon during the annual stockholders meeting on December 4.
There’s no shortage of shareholders who reckon that the split will do them no good and having seen the charts of many penny stocks that have gone through similar actions, we can’t say that we blame them. Still, there are others who seem convinced that with the investigational clinical uses of the stem cells expected to begin during Q1 of 2015 and with the prospects of having the stock uplisted to NASDAQ, the effects of the split won’t be that huge in the long run.
We’ll need to wait and see whether they’re right or not, but in the meantime, we want to draw your attention to another problem that could potentially put a spanner in the works.
To find out what it is, you need to take a look at ISCO‘s Q2 results:
- cash: $784 thousand
- current asset: $3.2 million
- current liabilities: $2 million
- quarterly revenues: $1.59 million
- quarterly net loss: $4.4 million
As you can see, although ISCO‘s pathogenetic stem cells aren’t commercially available, the company is generating revenues through the sale biomedical and cosmeceutical products. Unfortunately, they’re unable turn a profit and this, coupled with the fact that the monthly burn rate according to the 10-Q stands at $560,000, means that lack of cash could prove to be a rather big problem. How will they raise money in the future?
We’re about to find out, but at this point, we should probably mention that ISCO has something of a history of selling shares for cash and once you take a look at the changes in the O/S count and the longer term chart, you’ll see that the stock printing is starting to put pressure on the ticker.
On December 31, 2013, for example, the number of issued and outstanding shares was sitting at just over 150 million and ISCO was hovering above $0.21. On August 1, the O/S count was standing at around 213 million and the ticker was barely handing on to the $0.12 mark.
If the dilution continues, ISCO might have a hard time remaining stable even after the potential reverse split and uplisting. That’s why, skipping on the due diligence and research is something you don’t want to do.
