In the weeks before everything changes, a small biotech company experiences a certain kind of tension. As you read the filings, you can practically feel it. The clinical-stage cancer drug developer Sellas Life Sciences, which trades under the ticker SLS, has been working for years to reach a single goal that is now within reach. As of May 11, the company’s Phase 3 trial for galinpepimut-S, a treatment for acute myeloid leukemia, had 78 events. It requires 80. The data is unlocked after two more.
A company’s entire future is in jeopardy due to two patient events. It’s difficult to ignore that for even a moment.
When a catalyst is imminent, the stock has done what biotech stocks do. Swinging from a 52-week low of $1.39 to a high of $7.80 before settling around $7.08, SLS surged 41% last week alone and is up about 343% over the past year. When you look at such a chart, you can see its violence. It closed at $5.22 on May 12. $7.08 after three days. These aren’t a blue-chip industrial’s mild inclines. This company’s prices are based almost solely on belief.
Institutional money has taken notice. Morgan Stanley revealed that it added more than 445,000 shares to its SLS position in the first quarter, increasing it by almost 50%. Mirae Asset Global increased its ownership by more than 70%. BlackRock increased its holding to about 12.2 million shares by adding 4.7 million. Nevertheless, the situation isn’t entirely optimistic; Millennium Management reduced its stake by over 88%, and the Two Sigma funds also made cuts. It turns out that smart money doesn’t agree with smart money. Usually, it does.
CEO Angelos Stergiou said that the waiting period is the most difficult time for a chief executive. This may sound like investor relations gibberish, but it’s probably not. There’s something genuinely uncomfortable about a blinded trial. The results are unknown to the company. No one within does. Everyone just needs to wait for two more events to happen somewhere in the real world, in hospitals, among patients that most investors will never consider. They have prepared for the database lock and unblinding, and the equipment is ready.
That’s the part that gets lost in the din of Reddit threads and premarket pops. Retail investors trade convictions on the r/sellaslifesciences forum. One wrote about buying enough to matter if it 5x’s but not enough to ruin them, which is, to be honest, a fairly clear-eyed way to think about a binary biotech bet. Because this is exactly what it is. The stock will move, perhaps violently, depending on whether the REGAL readout validates years of work or not.
Underneath, the financials are as expected. a $8.41 million net loss in the first quarter. Not a single revenue or P/E ratio. However, Sellas established a $150 million at-the-market equity program and bolstered its cash position to $107.1 million, which buys breathing room and changes the focus from funding panic to the data itself. Additionally, SLS009, a second AML program currently in Phase 2, adds a little more nuance to the narrative than a single-trial risk.
Nevertheless, everything is dominated by REGAL. Community fair-value estimates range from $1 to $10, which is more of a confession that no one is aware of than an estimate. Over the next two weeks, Sellas will speak at three oncology conferences: Stifel, A.G.P., and TD Cowen. Because the company is also blind, traders will scrutinize every word for clues that won’t materialize.
It’s an odd sight. Standing in the same room, staring at the same closed door, a company, its investors, and its skeptics are waiting for two events that no one can rush. Whatever comes next will happen quickly. It’s just quiet right now.
