$ODT Odonate Therapeutics. Keep your eye on it.

Net cash: $114 MM

Market cap: $119 MM                Almost a net-net. 

ODT is a really weird stock. But it can be a net-net. Watch out! I am watching out! It's a biotech stock that stopped it's pipeline drug because FDA won't approve it, so the stock tanked! Literally (-80%). 

1. Why it's weird: A lot of insiders bought at the $15-17 range. *

Source 1:

I did the math for you, excluding BOX CAPITAL LLC, insiders (2) bought $50 million dollars worth of stock (Boxer bought $35 million). Mean price $16/share. 

Then all of a sudden the stonk tanks to $3. From $20. 

Why would insiders buy to lose money, I don't know. It is definitely not going back to $20. 

Apparently, "Odonate is discontinuing the development of tesetaxel and will wind down the operations of the Company." According the SEC filing 8k on March 25th 2021. ** "Odonate estimates that the Restructuring will be substantially complete by June 30, 2021 and that costs incurred in connection with the Restructuring will be approximately $14 million." Key word. $14 million restructuring cost. 

Apparently this is their only drug in their pipeline and people think it's going to go bankrupt. But little do they know their cash position.

2. Little do they know they have $150 million in cash...

Cash position: $157.3 MM + $2.6 MM Prepaid expenses = $160 MM cash position

Total liabilities they are obligated to pay: $31.74 million

Source 2: TIKR, you need an account, make a free account at the bottom, I gave you my referral code. I gain nothing. 

but don't forget restructuring cost is $14 MM. 

160-31.74-14 = $114 MM net cash position (after all liabilities.) 

But market cap is only $119.3 MM!!!!!

Ok it's not a net-net. It's almost a net-net. Watch out. 

**** I'm excluding the $7 MM in PP&E and $1.71 in other long term assets (I don't know what that is.) I don't know if it's worth fair value.

Their average cash burn rate is $30 million/ quarter, but since majority is of research and development, they are stopping that. So cash burn rate will be minimal? I only expect the $14 MM to be a cost. 

Negative EBITDA of -$30 MM a quarter, implying cash burn rate (depreciation is negligible, I look at the cash flow statement.)

https://stockanalysis.com/stocks/odt/financials/balance-sheet/?period=quarterly

They just did an equity raise in Q3 2020 for $88 million.

3. Interesting call options chain: many more open call options than put options. 

Many call options. Show yahoo options chain. People expect stonk price to go up? 

Source 2: Yahoo finance options chain.

That's why it's so weird, insiders lost so much money, and now it's almost a net-net because people think it's going to go bankrupt. 

What to make of this? If market cap drops drastically below $114 million, this will be a good feast. I need a large margin of safety to make this work, because these guys might take a chunk of cash for themselves. 

Sources:

Source 1: https://finviz.com/quote.ashx?t=ODT,ITOS 

**https://sec.report/Document/0001564590-21-015499/

***TIKR account: https://app.tikr.com/register?ref=9bsel3