Propanc Health Group Corp (OTCMKTS:PPCH) Drops Below 10 Cents
Last Thursday the stock of Propanc Health Group Corp (OTCMKTS:PPCH) crashed hard wiping 17.5% and closing at $0.106 per share. On Friday the stock suffered another hit and after losing another 10% of its value dropped below the 10 cents per share mark to a close at $0.095. Despite the two sizable corrections PPCH are still sitting close to their 52-week high while the company’s market cap is over $31 million. How realistic are such valuations though?
PPCH are trying to develop new cancer treatments for patients suffering from pancreatic and colorectal cancer. Their lead drug PRP, however, is still undergoing animal studies. This means that Propanc are at very start of the process towards eventual approval by the FDA, process that requires years upon years of clinical trials and a vast amount of funds. Unfortunately, at the moment PPCH’s resources are extremely limited – at the end of March the company had:
• $168 thousand cash
• $308 thousand current assets
• $2.1 million current liabilities
• ZERO revenues
• $454 thousand net loss
Even at this very early point in the clinical testing of the PRP drug the company has already amassed an alarming amount of convertible debt – $1.1 million of the reported liabilities consisted of convertible notes. The longterm shareholders have had to endure a crushing dilution of the commons stock with PPCH’s outstanding shares growing from 91 million as of November 19, 2014, to over 335 million as of May 15, 2015.
The company is trying to deal with the pressure of the outstanding convertible debt by prepaying some notes – on May 7 $100 thousand were paid to KBM worldwide for two notes while on June 18 $120 thousand were prepaid to KBM Worldwide and Carebourn Capital. The fact is that PPCH have to use their limited funds for the reduction of the convertible debt instead of supporting their drug candidate.
That is why the decision to put further strain on their balance sheet by hiring The Wealthy Biotech Trader to publish overly enthusiastic PRs about PPCH seems rather strange. The latest PR was issued last Tuesday and according to its disclaimer the parent company of the entity is being paid $5000 per month by PPCH in addition to the issuance of a $60 thousand convertible note.
Last Friday Propanc issued a shareholder update but without containing any concrete information it failed to stop the stock from crashing. If this means that the hype around the ticker is losing its strength the stock may be in for a prolonged downwards trend. Even if you believe in the potential of their cancer treatment the red flags around the company are simply too serious to be ignored. Do your own due diligence and adjust your trades accordingly.
