LPCN & QTNT: Two HIGH RISK Penny Stocks With Better than Average Potential

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Summary: Penny chasers are frequently asking me what penny stocks I’m in. As a result I have set myself to the task of providing the following write up on QTNT & LPCN. Please note that these are extremely high risk plays relative to what I’m normally trading. Should you feel the money fairy tugging at your wallet after reading this, please consider entering slowly and average down as necessary every 5% or so. Play it safe! Penny stocks can be volatile and averaging down on the standard 2-3% dip simply wont work with these. Nevertheless, both penny stocks below are already on a solid pullback … so if these look attractive to you at current prices, perhaps I’ve saved you some averaging down. God bless and safe trading!


finviz dynamic chart for  QTNT

Quotient Limited (QTNT) $4.51:

Background: Quotient Limited is a commercial-stage diagnostics company that is developing MosaiQ, a proprietary technology platform, which provides tests for immunohematology and serological disease screening. For those of you who hate researching biopharma and medial diagnostics companies, THIS VIDEO, should help you understand what MosaiQ is.

Profitability: Though unprofitable, Quotient Limited has consistently beat the analysts’ earnings expectations of the last 4 quarters. However until they can bring MosaiQ to U.S. & European markets, profitability is likely beyond their grasp. Their relatively high penny stock share price is but a reflection of the confidence of institutional investors.

Institutional Ownership: With 91.63% institutional ownership and strong analyst buy ratings, analysts & institutions are expecting big moves on this stock. The analyst price targets range from $10-$14 per share. Here is a list of their institutional owners. Note that Blackrock & Vanguard are among them. Their largest institutional investor is Perceptive Advisors LLC. Pending these folks maintain or increase their shares of QTNT, you can bet I will continue to be bullish on this stock.

Chances of FDA approval: Quotient Limited already has an emergency use authorization for the MosaiQ COVID-19 Antibody test. I therefore assess total FDA approval of the MosaiQ as likely.

Offering Risk: Quotient Limited’s offering risk is currently low as they just raised $80.5M on September 11th and as of the most recent quarter ending on 12/31/2020 they have $134.46M cash on hand. Their operating cash flow for the trailing twelve months is (negative) -$72.63M with a debt to asset ratio of 96.88%. Ceteris Paribus (Which is never the case with these companies), I assess the chances of an additional offering in the next 1-7 months as LOW, 8-12 months as MODERATE, and thereafter as HIGH.

So What Happened?: The FDA requested additional data for MosaiQ instead of approving it. As of last ER I believe QTNT announced that they would resubmit to the FDA for approval by February (Shareholders were certainly expecting it!). This turned out to be untrue. Moreover, their COO & CEO retired which added additional stress to the share price. There are three ways I see the issues and prospects for imminent FDA resubmission (Which is obviously a catalyst). 1) Quotient has some serious issues getting their data together for resubmission. 2) Something is wrong with the data. 3) They’re just a little behind (Not uncommon for these types of companies operating off the shareholder dole). 4) A combination of these three. Last ER they did announce that they want to be more thorough before expected resubmission in February by giving the FDA more conclusive and overwhelming data. They also announced that they expect to improve upon MosaiQ. All failures derived from intermittent trials, oversight, and data, was of course, blamed on COVID-19. Personally, I blame it on bad project management which perhaps accounts for the “retirements.” Anyway I am long QTNT.

Possible Catalysts

  1. Imminent to the FDA with additional data for their Initial Serological Disease Screening Microarray (SDS) and MosaiQ instrument
  2. Mid to Late 2021 FDA approval of their Initial Serological Disease Screening Microarray (SDS) and MosaiQ instrument
  3. Perhaps They’ll release some bullish info at a conference
finviz dynamic chart for  LPCN

Lipocine (LPCN) $1.55:

Background: Lipocine is a clinical-stage biopharmaceutical company, focused on the development of pharmaceutical products for the treatment of metabolic and endocrine disorders. The most promising drug in my view is TLANDO which is a testosterone therapy product, although LPCN 1144, an oral prodrug of bioidentical testosterone that is in Phase 2 Clinical trial for the treatment of NASH, looks very promising as well. TLANDO, in my opinion, has many billions in worldwide marketability for low testosterone.

Profitability: LPCN is yet another company that has yet to realize profitability. Though profitability isn’t what’s driving their current share price. Their share price is almost entirely driven by the prospects of their star drug, TLANDO, and Phase II NASH trial results.

Institutional Ownership: Institutions only own 10.99% of this stock. Like QTNT, Blackrock & Vanguard are also some of the major institutional investors who own significant shares in the company.

Chances of FDA Approval (TLANDO): I believe it to be a foregone conclusion at this point as the FDA has already tentatively approved it. So, what gives huh? Read on my friends.

Offering Risk: Offering risk at this time is low as a result of their most recent offering on January 25th where they raised $28.7M. As of the most recent earnings announcement, prior to raising money, they had, $18.8M in cash and an operating annual cashflow of (negative) -14.93M with a debt to asset ratio of 41.38%. Ceteris Paribus, I expect the chances of another offering in the next 6-9 months as LOW, 10-12 months as MODERATE, & 12+ months as HIGH.

So What Happened?: Oh God I hope I don’t torture this. The reason LPCN received tentative approval from the FDA for TLANDO was because their competition, Clarus, received approval from the FDA first. Moreover, the FDA granted Clarus exclusivity, which means LPCN cannot market TLANDO until March 2022. This is odd because the FDA generally does not get in-between two competing companies … particularly where there are patents involved. And speaking of patents, Clarus DOES NOT HAVE ONE! These places LPCN in a unique position. At this time the fate of TLANDO, a drug that could bring LPCN billions and send their share price through the roof, hinges on a patent infringement trial. When is the trial? Well it continues to get pushed back as a result of COVID, and even I have lost track of it. Last I heard the trial was supposed to take place on February 8th. However, we are in luck. There will be updates as to their status when they report earnings… EXPECTED on 3/11-3/12. In any case, should LPCN win the lawsuit, and I think things look good for them here, they will likely receive damages from Clarus. This may even get settled out of court. Who knows? Nevertheless, I own 10x 20JAN2023 $2.5 calls on this one.

Possible Catalysts:

  1. LPCN wins their lawsuit against Clarus
  2. LPCN & Clarus settle out of court
  3. LPCN announces bullish info at a conference
  4. LPCN earnings EXPECTED on 3/11
  5. LPCN advances one of their other pipelines (They have some really impressive stuff!)

It important that you do your own research! I can often overlook things. Always do your own DD!

IMPORTANT DISCLAIMER: I am NOT a registered investment adviser, broker dealer, or member of any other association for research providers in any jurisdiction whatsoever and I am NOT qualified to give financial advice. Investing/Trading in securities, particularly microcap securities, is highly speculative and carries an extremely high degree of risk. The information, analysis, and opinions listed above are my own and may not properly reflect the underlying conditions of a company or security. You should do your own Due Diligence. If you trade based on anything I have written YOU ACCEPT FULL RESPONSIBILITY AND LIABILITY for your own trades and actions and hold the author of this publication harmless. If that isn’t clear enough DO NOT TRADE, ACT, OR INVEST, BASED UPON ANYTHING I WRITE OR RECOMMEND. There, we should be solid now. 

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