Georgi Kamburov

Emisphere Technologies, Inc. (OTCMKTS:EMIS) Jumps Up

by Georgi Kamburov May 24, 2016

During yesterday's trading investors showed increased interest towards the stock of Emisphere Technologies, Inc. (OTCMKTS:EMIS, EMIS message board) with the number of shares changing hands surpassing 325 thousand. For comparison, the monthly average stands at less than 39 thousand shares. The intense buying pushed the ticker almost 13% up the chart for a close at exactly 70 cents per share.

There isn't an immediately obvious reason for the stock's surge. Could it be a delayed reaction to the quarterly results that EMIS announced on May 16? Let's open the financial report and find out - as of March 31, 2016, EMIS had:

• $10.4 million cash
• $12.7 million total current assets
• $21.7 million total current liabilities
• $373 thousand net revenues
• $1.8 million net loss

The balance sheet makes it abundantly clear that EMIS is far from the typical pharmaceutical pennystock. In addition, on a year-over-year basis the reported revenues show a massive increase compared to the $6 thousand in net revenue from a year ago. Even the net loss has been improved as it is nowhere near the $33 million reported at the end of March 2015.

During the quarter Novo Nordisk (NYSE:NVO) commenced Phase 3a clinical trials for oral semaglutide, in which one of EMIS' Eligen Technology carriers is being utilized. Back in October 2015 NVO and EMIS entered into a new license agreement, thanks to which Emisphere received $5 million as an upfront licensing fee and $9 million as a prepayment for a product development milestone. As a whole EMIS is eligible to receive a total of $207 million upon the successful achievement of certain development and sales milestones.

Jumping into the company without taking the risks into consideration could be extremely dangerous, though. EMIS has a working capital deficit of nearly $9 million and accumulated deficit of over $556 million. The company is also heavily burdened with debt, with approximately 72.2 million in financial obligations at the end of March. Under the terms of its loan agreements the company is required to use 50% of any extraordinary receipts, in this case the $14 million received from Novo Nordisk, to pre-pay certain loans and notes. This will leave EMIS with enough resources to fund their operations through July 2016.

In order to extend the deadline for the pre-payment, or to get the obligation waived, EMIS were supposed to submit a proposal to the creditor by May 20. Currently we are 4 days past that date but there have been no PRs or filings stating that the proposal has indeed been submitted.

Thorough due diligence is always necessary when putting any amount of money on the line and EMIS is not an exception. Do your own research and adjust your trades accordingly. 

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