Flex Pharma, Inc. (NASDAQ: FLKS) is a clinical-stage biotechnology company founded by National Academy of Science Members Rod MacKinnon, M.D. (2003 Nobel Laureate), and Bruce Bean, Ph.D., recognized leaders in the fields of ion channels and neurobiology, along with Christoph Westphal, M.D., Ph.D.

 

Flex Pharma’ pipeline:

On June 13, 2018, the Company announced that it was ending its ongoing Phase 2 clinical trial investigations of FLX-787 in Motor Neuron Disease (MND), which primarily included patients with amyotrophic lateral sclerosis (ALS), and in Charcot-Marie-Tooth disease (CMT), reducing its workforce and engaged Wedbush PacGrow to help the Company assess its strategic alternatives.

“We continue to believe in the potential of FLX-787 to reduce painful cramps and spasms in patients with neurologic diseases. However, given the additional development work required to advance a FLX-787-based product, it was in the best interest of our stockholders to stop the ongoing MND and CMT studies, reduce our workforce and assess our strategic alternatives. That assessment is underway, and we are working diligently to conserve working capital and enhance stockholder value. While we conduct the assessment, we are continuing to assess the potential of FLX-787 in dysphagia (difficulty swallowing) and to operate the HOTSHOT consumer business,” stated Bill McVicar, Ph.D., President, and CEO of Flex Pharma.

Recent Corporate Activities: The Company has stopped its clinical trials in MND and CMT and is the process of winding down those studies. That wind-down is expected to be completed in the third quarter of 2018. The majority of the reduction in the Company’s workforce announced on June 13, 2018, was completed by June 30, 2018. The remaining reductions will be completed in the third quarter of 2018.

 

From a liquidity and financial flexibility standpoint, based on its remaining research and development plans, its consumer brand and HOTSHOT expenditure plans and the expected savings due to ending Phase 2 clinical trials in MND and CMT, the management now expect the existing cash resources and marketable securities will provide a runway for at least 12 months.

 

Notwithstanding this temporary setback, analysts tracking the stock believes that shutting down two programs in the pipeline would lead to a significant reduction in workforce and associated costs. Also, from the business perspective, the company will now be focussing their efforts on assessing the potential of FLX-787 in dysphagia (difficulty swallowing) and operating the HOTSHOT consumer business while the strategic review is ongoing.

 

Per www.marketbeat.com, their average twelve-month price target is $17.50, suggesting that the stock has a possible upside of 2,906.87%. The high price target for FLKS is $40.00, and the low-price target for FLKS is $6.00. There are currently 3 hold ratings, and 2 buy ratings for the stock, resulting in a consensus rating of “Hold.”

 

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About the company: Flex Pharma, Inc. is a biotechnology company that was focused on developing innovative and proprietary treatments for muscle cramps, spasms, and spasticity associated with severe neurological conditions. In June 2018, the Company announced that it was ending its ongoing Phase 2 clinical trials of FLX-787 in patients with motor neuron disease (“MND”), primarily with amyotrophic lateral sclerosis (“ALS”), and in patients with Charcot-Marie-Tooth disease (“CMT”), due to oral tolerability concerns observed in both studies.

 

About HOTSHOT:  HOTSHOT™ is the sports shot with a kick that is scientifically proven to prevent and treat muscle cramps. A scientific breakthrough in sports nutrition, HOTSHOT is a proprietary formulation of organic ingredients that boosts Neuro Muscular Performance – how an athlete’s nerves and muscles work together optimally.

 

Second Quarter 2018 Highlights:

Revenue: FLKS’ Consumer Operations segment generated all of its revenue during the three months ended June 30, 2018, totaling $0.2 million as compared to $0.3 million for the three months ended June 30, 2017, through sales of HOTSHOT and expedited shipping and handling purchases. The decrease in revenue of $0.1 million relates to decreased marketing spend and activity during the three months ended June 30, 2018compared to the three months ended June 30, 2017, as the company has reduced its Consumer Operations spending while they have been evaluating strategic alternatives for the business.

Profitability: FLKS’ consolidated loss from operations for the three months ended June 30, 2018, totaled $9.1 million. Of this total, $0.6 million of the operating loss was incurred by its Consumer Operations segment, $6.2 million was incurred by its Drug Development segment and the remaining $2.3 million related to corporate and unallocated costs.

 

Net Loss: Net loss for the three months ended June 30, 2018, was ($9.1) million, or ($0.50) per share and included $0.5 million of stock-based compensation expense. The net loss for the second quarter of 2018 was primarily driven by the Company’s operating expenses related to its research and development efforts, costs associated with HOTSHOT, and general and administrative costs.

 

Liquidity:

• The Company incurred a loss of $9,051,872 for the three months ended June 30, 2018, a loss of$17,275,099 for the six months ended June 30, 2018 and had an accumulated deficit of $128,314,157 as of June 30, 2018.
• The Company had unrestricted cash and cash equivalents of $15,756,971 on June 30, 2018. The Company’s operating plan assumes limited research and development activities and that the Consumer Operations segment will continue to sell HOTSHOT.
• Based on the Company’s operating plan, the Company believes that its existing cash and cash equivalents will be sufficient to allow the Company to fund its current operating plan for at least 12 months from the date the financial statements are issued.

 

Key risk factors and potential stock drivers:

• The company recently implemented a plan to reduce the workforce and initiated a process to explore a range of strategic alternatives, including the potential sale or merger of the Company. Any positive announcement related to the same could be a significant near-term trigger for the company.
• Company’ ability to resume drug development activities for FLX-787 or any other drug product candidates
• Company’ ability to maintain liquidity and financial flexibility to fund its incremental capital requirements will remain a critical challenge for the company.
• Pharmaceutical and biotech industries are subject to extensive regulation by government agencies, including the FDA, the Drug Enforcement Administration (“DEA”), the FTC and other federal, state and local agencies.

 

Stock Performance

Comments:

• On Friday, Oct 19th, 2018, FLKS closed at $0.582, with an average volume of 2.83 million shares exchanging hands. Market capitalization is $10.516 million. The current RSI is 50.71.
• In the past 52 weeks, shares of FLKS have traded as low as $0.39 and as high as $8.980
• At $0.582, shares of FLKS are trading above its 50-day moving average (MA) at $0.52 and below its 200-day moving average (MA) at $2.84
• The present support and resistance levels for the stock are at $0.50 & $0.71 respectively.

 

 

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