Aptorum Group Ltd (NASDAQ: APM) is running for the top in the market this morning, and for good reason. The company announced that Health Canada has approved the company’s application to begin a Phase 1 study. Here’s what’s happening.
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- Aptorum Group Announces Phase 1 Study Approval
- Management Commentary
- A Short Squeeze in the Making
- Risks to Consider Before Buying APM Stock
- Final Thoughts
Aptorum Group Announces Phase 1 Study Approval
In the press release, Aptorum Group said that it has received clearance from the Public Health Agency of Canada, also known as Health Canada, to move forward with a Phase 1 clinical trial of ALS-4.
ALS-4 is an orally administered small molecule drug that’s intended to treat infections caused by staphylococcus aureus. One of the most important of these infections is MRSA.
APM went on to explain that the Phase 1 clinical trial is expected to recruit up to 48 healthy volunteers for the single-ascending dose arm and 24 healthy volunteers for the multiple-ascending dose arm.
Through the trial, the company will evaluate the safety and tolerability of single and multiple doses of ALS-4 administered orally in healthy subjects. The company will also be looking into the pharmacokinetic profile of the treatment.
In a statement, Dr. Clark Cheng, CMO and Executive director at APM, had the following to offer:
The clearance of our CTA application for ALS-4 drug represents a significant milestone for the company and one of a number of targeted strategic goals for 2021. This milestone supports the transition of Aptorum Group to a clinical-stage company and reflects the potential of our scientific rigor and novel approach of our products. We are dedicated to delivering novel therapeutics in the field of growing unmet medical needs of infections starting with Staphylococcus aureus.
A Short Squeeze in the Making
Companies announce the approval and commencement of Phase 1 clinical trials all the time, but their stocks don’t always climb more than 50% on the announcement. So, what’s the deal?
Well, it seems as though the stock is squeezing the shorts.
Prior to the announcement, the short interest on APM stock was quite high. When a stock begins to tick up, those who shorted the stock start to realize losses. As such they race to buy shares to cover their short positions and cut the bleeding in what’s known as a short squeeze. That seems to be what’s taking place right now.
To add fuel to the fire, Aptorum Group only has a float of 8.79 million shares. That’s an ultra tiny float, meaning that share supplies are relatively low. As the law of supply and demand tells us, when supplies are low and demand is high, prices must rise. So, the tiny float seen on the stock is only helping to expand the gains we’re seeing in the market today.
Risks to Consider Before Buying APM Stock
Investing is a process that involves risk. Whether you’re investing in APM or some other stock, or putting away money in a savings account, you’ll have to be willing to accept risk. When it comes to Aptorum Group stock, the most significant risks to consider include:
- The Company Doesn’t Make Money. Aptorum Group is a clinical-stage biotechnology company. That means that it doesn’t have any products on the market from which it is able to generate revenue. With no money coming through the doors, the company must rely on its own bank account. If those funds dry up, it will likely look to public markets to raise funds through the sale of newly-issued shares, resulting in dilution and likely significant declines.
- Clinical & Regulatory Risk. Clinical trials and ultimately regulatory approval are overwhelmingly important to clinical-stage biotechnology companies. Should a clinical trial fail or regulatory agencies find holes in the data, significant declines will be the likely result.
- Penny Stock Risks. Finally, APM is a penny stock. As a penny stock, it is subject to extreme volatility, making entrance and exit decisions difficult to time.
While an investment in APM may come with risks, there’s no such thing as an investment without potential risk of loss. All in all, things seem to be headed in the right direction.
First and foremost, with an active clinical trial likely to take place soon, there will be plenty of catalysts ahead that could result in dramatic gains. Moreover, the company is embarking on a journey that could result in it tapping into a market that generates billions of dollars in revenue annually for its participants. All in all, APM stock is one for the books.