Ensysce Biosciences Inc. (ENSC)
Is $ENSC a Buy-Buy-Buy?
When we last checked in on Ensysce Biosciences Inc. ENSC 0.00%↑ it had just been granted a Breakthrough Therapy Designation (BTD) for PF614-MPAR by the FDA. It remained in the “Prove It to Me” watchlist as the price volatility seemed erratic leading to the next FDA meeting on January 30th.
What’s New: 02/21/24
Last time we looked at ENSC they had just received FDA breakthrough designation and had announced positive progress on their Phase 2 trials. Heavy trading on this news sent the stock price north of $1.5. Daily peaks of 41 and 18 million trades is insane for a stock that averages less than 200k in daily volume. In our last update I asked if the stock could shake off its reputation for volatility and show some price stability after good news. It did not. Instead it got caught in a short term trading cycle where traders looked to take a quick profit off of the bounce and get out. With earnings still a month away it looks like ENSC will remain in this cycle for the foreseeable future. I wanted ENSC to prove that they could shepherd a drug through the FDA process without setbacks and I wanted the stock to prove that it could respond positively to good news. So far it has done both, but holding this stock is still a rollercoaster ride. I expect it will start creeping slowly upward on low daily volume but with Phase 3 trials still a long way off, and interest rate cuts a long way off as well, the ENSC rollercoaster isn’t likely to end any time soon.
02/01/24:
On 31JAN24 Ensysce Biosciences Inc. ENSC 0.00%↑ announced:
“…the completion of a constructive End of Phase 2 meeting with the Food and Drug Administration (FDA) regarding its lead ‘Next Generation' analgesic, PF614. The meeting facilitated an affirmation of the Company's non-clinical program and enabled an exchange of constructive ideas regarding Ensysce's Phase 3 clinical trial designs for PF614.”
You can read the complete press release here:
Moving Forward:
This was the last piece we were waiting for in order to UPGRADE ENSC 0.00%↑ to the “Checking My Math” watchlist. With ENSC 0.00%↑ in the home stretch following its Phase 2 complete it seems the path to profitability has become much clearer.
UPDATE 01/25/25:
ENSC announced on Tuesday (23JAN24) that:
“Receipt of notice from the U.S Food and Drug Administration (FDA) that it has granted Breakthrough Therapy Designation (BTD) for PF614-MPAR. A next generation opioid, PF614-MPAR represents a major scientific innovation, as it is what we believe to be the first product with oral overdose protection in any drug class”.
As to the importance of Breakthrough Therapy Designation (BTD) from the same notice:
“BTD is a rarely used designation, having been granted to fewer than 300 drugs. It is designed to expedite the development and review of drugs that are intended to treat a serious condition where preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over available therapies.”
You can read the complete press release here:
Phil’s Take:
Since we spotlighted ENSC on January 3rd (found below) it had experienced the kind of volatility that we had expected, climbing as high as $1.41 before dropping back down to $1.14 where it opened today before the news. Clint and I debated how much more ENSC had to prove before we considered moving up our watch list and I think this is a positive first step. Shortening the potential time, it takes for a drug to get to market is shortening the time to profitability. ENSC still hasn’t shaken off the reputation for volatility so I’ll be looking to see if they can hold a new floor north of $1.5. ENSC still has a discussion with the FDA scheduled for January 30th about the end of Phase 2 trials so I’m looking for them to continue to stack good news without serious negative volatility. In our spotlight we asked ENSC to prove something to us, this was a great first step.
Clint’s Take:
I agree with Phil about where ENSC could be headed. Always have. As I said in the original Spotlight (found below), my concerns were never “what” they were bringing to market, just more of the “when” and “how”? This FDA fast track addresses some of that and positively boosts ENSC’s potential. The volatility continues (another one of my original concerns) as we saw significant increases in volume over the past three days (reaching 41.4M on the day of the announcement, up from its 309K average) and equally uneven price movement. On the morning of the announcement, ENSC shot out the gate from a $1.14 previous close to a $1.49 overnight/open, $1.91 high, to close at $1.33. This pattern has repeated into today’s session except for the volume levels, which I take as a good sign. While anything above $1.79 seemed too heavy to hold this past week for ENSC, the decreasing volume trend and a smaller gap between the “open-high-close” signals to me that more sustained growth may be sooner than I initially anticipated.
Moving Forward:
For now, ENSC will remain on the “Prove It to Me” watchlist. If this current volatility can settle before the next FDA assessment, we may get a clearer picture of things to come for the stock price. We will also be paying close attention to volume trends to try and see how many investors are “long” in their position, as well as any influx in institutional buys. Both will help gauge if the rug gets pulled out from under the stock price again should it see another spike.
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ORIGINAL POST: 01/03/24
Ensysce Biosciences, Inc. (ENSC) is a NANO CAP company founded in 2003 and began public trading on the Nasdaq in July 2021. In their own words from Ensysce’s website:
“Our proprietary TAAP and MPAR technologies improve the care and safety of patients by preventing the possibility of both abuse and overdose of prescription drugs. Our mission is to revolutionize the safety and oral delivery of medicines for areas of high unmet need.” [ https://ensysce.com/about-us/ ]
Phil’s Take:
With all clinical stage biomedical startups, I am looking for a novel product in a growing market and a clear path forward towards FDA approval. ENSC has all three. Proprietary technology to prevent opioid abuse. Products targeted at a chronic pain market that is projected to be $140B by 2030. And they have FDA fast track approval with their Phase 2 trials expected to be completed by January 2024. They have beat earnings in each of the last four quarters. Their potential partnership with Swedish OncoZenge (OCOZ) to bring their product to the US market is a promising sign of collaboration but they are also awaiting FDA approval. The flexibility and broad application of their pill technology creates the opening for additional partnerships and/or licensing in the future. They also have an ADHD medication in the pipeline but that is years away (ADHD was a $13B industry in 2023).
The downside is that they’re only in Phase 2. Even with FDA fast track approval, Phase 3 will take at least a year. On top of that, only 30% of drugs advance past Phase 3. Medium-term profitability is a serious concern. Cash and cash equivalents were at $1.5mm for Q3 down from $3.8mm in Q2. They just held another shareholder meeting on December 29th to approve another round of stock offers so price dilution in the near term is a serious concern. Plus, Phase 3 clinical trials aren’t cheap.
The price volatility is also a concern especially ahead of a potential stock offer. Steep price drops became a bit of a habit in 2023. Its ability to bounce back from a $.76 floor was a promising sign of resilience but as Clint loves to point out, low volume stocks (average 10-day volume of 83,147) are always risky. But if the stock price dips any lower it’s a risk, I am personally willing to take. ENSC is a struggling stock. The question for me, as an investor, is whether they have the potential to reverse that struggle. Their technology, combined with the market potential, is that potential. Positive news from the shareholder meeting in December will allow them to stabilize their cash on hand for 2024 but likely at the cost of their current price. Positive news from the FDA in January might provide a small boost but it is not clear that ENSC has found a stable floor. The sub $1 price is appealing if you’re willing to make it a very long-term hold, but given the volatility, it may be possible to get a similar price further into 2024.
Clint’s Take:
Bioscience investing always reminds me of 5th Grade Science Fairs with the “Hypothesis” on the leftmost panel of the tri-fold poster board. For ENSC, it's an exciting idea. The TAAP (Trypsin-Activated Abuse Protection) and MPAR (Multi-Pill Abuse Resistance) technology are unique and novel approaches to prescription drug abuse and overdose. Our bodies become the ultimate biometric safeguard against misuse of pain medications upon activation by our own digestive enzymes. So far, it's a blue-ribbon contender, but I become more skeptical as we move to panels two and three.
As Phil laid out, and I am now scotch taping to my "Procedure" centerboard, ENSC is still very early in the FDA approval process. TAAP is nearly finished with Phase 2, and MPAR is halfway through Phase 1, according to ENSC investor's resources page. That puts profitability quite a way off, even without setbacks. Any discussions with the FDA this January only plot the remaining trials through the subsequent phases. From there, we are still looking at late 2025 for commercialization to be realistically achieved. The OCOZ team-up is smart and gives ENSC access to another IP (intellectual property) that is much closer to the market. That may keep this ship afloat through the approval process for TAAP and MPAR.
I would type the final "Results" panel in a six font because ENSC is tiny, even for a nano cap. Does it make it less innovative? No. Does its size limit its potential down the road? No. Does it make me nervous? Yes. ENSC has seven employees, six of whom are on the management team. The partnership with OCOZ, which has two employees, now means they can field a softball team together. ENSC's 309K average volume makes it a feather in the wind. The threshold for a bad day of trading is low. News stories on battling prescription drug misuse can send ENSC to the moon, but not for long, as we have seen from a 52-week high of $18.36 to the $1.11 today. A buy now means a long roller coaster ride of volatility to deal with for upwards of 18 months.
But I do love their biotech. Despite the road ahead or their size, I can't take that away from them. I look at it like the implementation of seatbelts in cars during the 1960s. Every pharmaceutical maker is going to have this. Clear sailing in Phase 3 may catch the attention of more significant Biomed partners. Couple that with a growing public health crisis in opioid abuse, and ENSC could find some sure footing to stabilize on. When that happens, I am all in. Just not today.
Moving Forward:
(This post’s Moving Forward has been updated above)
We will place ENSC in the “Prove It to Me” watchlist, paying particular attention to price movement around any FDA or expansive partnership news. I understand Clint’s concerns and I have them too. Investing this far out from an approved drug on the market may be an unnecessary risk. There is still time and as investors we all have things we need to see from a company before we buy. ENSC has what I am looking for, while Clint needs to see more. This is one of those stocks where solid research and following it closely will pay off in the end. The very definition of a watchlist stock.
Thanks for reading! We'd love to hear from you with any questions or comments you have.
You can get updates on Ensysce Biosciences Inc. by subscribing for FREE today and check out the Ledger Island Watchlist for the complete list and latest looks on all the companies we cover in our weekly Spotlights.
