This post is about the upcoming EUA for VERU Sabizabulin which has proven remarkably effective in treating hospitalized COVID patients.
Phase III trial was so effective that the FDA has issued an early approval and considered the trial a success. Source: (https://www.cbsnews.com/news/cancer-drug-sabizabulin-covid-19/)
Now, I know exactly what you are thinking: isn't COVID pretty much gone these days?
The answer is: absolutely NOT.
The Fundamentals (aka Gasoline):
Hospitalizations for COVID are on the rise since May with the new and improved Omincron strain (source: https://www.cnbc.com/2022/07/12/covid-hospitalizations-have-doubled-since-may-as-omicron-bapoint5-sweeps-us-but-deaths-remain-low.html) and while deaths are still low compared with the chaos of 2021, COVID is still a huge threat that should be taken seriously by everyone and especially by the elderly and overweight.
Hospitalizations will continue to rise as air conditioning usage goes into overdrive and with the 0% probability of the country shutting down again and/or requesting mandatory mask use. Mandated mask use at a federal level has 0% of making a comeback with the midterm elections looming large.
Come hell or high water the country will stay open and COVID hospitalizations will continue to increase throughout the summer.
And what does this mean to VERU? At this point the approval of Sabizabulin to treat COVID hospitalizations is a done deal. The main question is: will it classify for an EUA and if so, what is the size of the contract i.e. guaranteed revenue?
The Rag soaked in Kerosene:
If previous history is to be considered, EUA contracts for COVID meds that were FAR less effective than Sabizabulin (and with additional side effects) have been in the ball park of $5-$10 BILLION. That's Billion with a B and even the low end of the range is around 5x the current marketcap of VERU.
The High Octane Lighter Fluid:
As if the fundamentals were not strong enough, there is another aspect that makes VERU a very interesting prospect and that is Short Selling. As I write this post, VERU is currently short by about 20M shares (source: https://shortsqueeze.com/?symbol=veru).
When you consider insider ownership of around 20%, the 20M represents roughly 31% of the entire circulation. And that's the most conservative estimate. Fintel and Ortex, for example, have it at close to 50% short of float. Funding rates (i.e. interest you must pay to short the stock) are starting to rise and in the (very likely) event of an EUA, it will a race to cover positions.
The Match:
The FDA is expected to respond to VERU requests for EUA by August 5th. Note that they can respond at anytime before then, that is simply the deadline. I expect a positive response based on the feedback of Phase 3 trial. Once the news trickle down of how much more effective Sabizabulin is versus other regular options like Tamiflu, the stock will further rally into strength propelled by high octane short covering.
I welcome any thoughts on this thesis, especially critical ones
TLDR: $1B marketcap Biotech company with a very likely EUA approval for a much more efficient COVID medication is currently sitting on a perfect storm of short selling and fast increasing COVID hospitalizations in a country that will NOT go back to shutdowns no matter what.
Disclaimer: This post is merely my opinion and should not be taken as investment advice.
Leave a Reply