ENOB Stock Price Down 15% – Time to Buy ENOB Stock?

Yesterday was a huge day for the stock of Enochian BioSciences (ENOB) as the stock settled almost 54% higher after the company announced that the US Food and Drug Administration (FDA) accepted the firm’s application for its pre-investigational HIV drug, which seeks to cure patients who suffer this disease and who have not responded to antiviral therapy.

This nod from the FDA would allow ENOB to discuss with the agency the possibility of studying the performance of the treatment within a larger group of patients who have already been taking antivirals to control the disease as they could benefit from the treatment’s increased level of control and even from its potential ability to cure HIV entirely.

The approval of this Pre-IND application came after the company conducted a study on a single patient, a 54-year old individual who had failed to suppress the virus by using antiviral drugs and who achieved viral control for 255 days through ENOB’s innovative treatment.

The stock price of ENOB reacted quite positively to the news while the issue experienced its highest daily trading volume on record as 105 million shares exchanged hands just yesterday.

However, the stock is going down almost 15% this morning, possibly as long-term holders are taking some profits after Monday’s pronounced gain.

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ENOB stock – fundamental analysis

Enochian BioSciences is a California-based biotech firm whose pipeline is primarily focused on developing HIV treatments including a potential cure and a vaccine for the disease. The drug moved to Pre-IND, known as ENOB-HB-01, would be the first one to be moved to this stage while three other treatments are currently in the pre-clinical stage.

A Pre-IND is a phase in which the developer of the drug will sit down with the FDA to discuss the project to receive guidance about the upcoming stages – in this case the IND phase, which involves administering the drug to a larger group of human subjects.

To be clear, ENOB has not yet received approval from the FDA to start the IND phase. This announcement just means that the company will be discussing with the FDA the merits of the project to see if there is enough objective evidence to move forward to the IND phase. This means that it could still be years until ENOB can successfully release to the market this or any other of the drugs within its pipeline.

For now, the company will continue to generate no revenues, while net losses landed at $13.5 million last year.

Meanwhile, and perhaps another reason why the stock popped, ENOB managed to place a $29 million at-the-market offering that was bought by a group of institutional investors at $7.5 per share.

During the first quarter of 2021, the company had a total of 46.78 million shares outstanding. If we add the 3.867 million shares issued by the company yesterday, that would result in a valuation of around $380 million for the biotech firm.

This shows that institutional investors appear to be quite optimistic about this latest advance in the firm’s pipeline of drugs, even though it could be years before the company starts generating a dime in revenue from the sale of these treatments.

ENOB stock – technical analysis

Not much can be said about the technical situation of ENOB shares as this kind of one-time event-driven spikes don’t necessarily point to a change in the underlying trend of the stock.

However, it seems interesting that ENOB was posting a set of higher lows prior to yesterday’s uptick. Meanwhile, the valuation given to the company by this group of institutional investors at $7.5 per share could provide a higher floor for the stock once the dust settles.

For now, that support could be found at around $5 per share, which coincides with the huge price gap left behind as a result of Monday’s price action.

Moving forward, the price might trade at or above this price unless there is a material change in the firm’s business and product pipeline. That said, it is important to note that these $29 million might only serve the firm to cover one and a half or maybe two years of operating expenditures.

On the other hand, if those expenses are increased as a result of an upcoming IND phase, chances are that the firm will need another liquidity injection. The price of this hypothetical offering will end up determining the extent to which shareholders will see their ownership diluted.

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