$RAIN A Mantra For Oncology TrialsTrial failures can sometimes be opportune events for investors. After Rain Oncology Inc. (NASDAQ: RAIN)’s Mantra treatment for Liposarcoma presented with subpar trial results, RAIN stock plummeted to a new all-time low. However, this sell-off could be an overreaction by the market since RAIN still has two treatments in its pipeline, one of which is in phase 1 and the other is in phase 2. Considering that the latter treatment showed promising results in its phase 1 trial, RAIN stock’s dip could be an opportunity for long-term investors in anticipation of trial results for its other treatment. At the same time, RAIN’s short interest is rapidly increasing which might signal a short squeeze in the near term if enough investors take notice of the company’s pipeline.
RAIN Fundamentals
After its phase 3 trial failed to meet the primary endpoint of progression-free survival vs. standard of care, RAIN stock plummeted 87% as the company terminated its most advanced trial. However, RAIN could be poised to rebound soon as investors may have overreacted to the news. While failing in clinical trials is a negative catalyst, investors may have overlooked RAIN’s pipeline where the company has 2 treatments in clinical trials.
The most advanced trial in both is Mantra-2 which utilizes Mantra or Milademetan to reactivate the p53 gene which plays a pivotal role in cell division and cell death. In this way, the body becomes able to identify cells that overexpress MDM2 proteins which are cancer cells.
During the Mantra-2 phase 1 trial, patients with higher doses experienced a higher overall median for survival, and treatment-naive patients – patients experiencing a treatment for the first time – experienced a drastically increased median survival rate of 14 months – which is double the average. This shows that patients exposed to the treatment for the first time have drastically better results than those who are already used to the treatment which indicates that the treatment is effective at combatting overexpressed MDM2. This is a promising sign since MDM2 inhibitors usually result in hematologic toxicities which means toxicities in blood.
In addition to having 2 treatments in its pipeline, RAIN has a cash position of $110 million which, according to the company, is enough to complete all of its trials including the recently terminated phase 3 trial. Based on this, RAIN may not need to dilute its shares to raise capital in the future given that its cash burn rate is sustainable and the company should save funds from the terminated trial.
Following the termination of its phase 3 trial, RAIN’s short interest increased to 16.2% – a 41% increase from last week – and has a utilization rate of 100%. In this way, a short squeeze may occur in RAIN stock if more investors take notice of the company’s other trials which may see the stock soar from current levels.
RAIN Financials
According to RAIN’s Q1 2023 report, its assets decreased from $135 million to $114 million QoQ. That said, RAIN has $112.9 million in current assets due to having $44.1 million in cash on hand and $65.6 million in short-term investments. At the same time, liabilities declined QoQ from $22.1 million to $19.6 million. With this in mind, RAIN has a current ratio of 5.7 which is impressive for a pre-revenue biotech company.
Meanwhile, RAIN’s operating costs have increased slightly light YoY from $13.5 million to $16.6 million. As a result, RAIN’s net loss increased from $17.6 million to $20.3 million.
Technical Analysis
RAIN stock is in a neutral trend as it is trading in a sideways channel between $1.14 and $2.16. Looking at the indicators, RAIN is trading below the 200, 50, and 21 MAs. However, the RSI is extremely oversold at 11 and the MACD is approaching a bullish crossover.
As for the fundamentals, RAIN’s most recent catalyst was the failure of its phase 3 Mantra trial which has led to the major sell-off. However, RAIN still has 2 treatments in clinical trials with the phase 2 trial of Mantra-2 expected to be completed in 2024. Given that the RSI is extremely oversold, RAIN’s current PPS could be a good entry in anticipation of a rebound soon.
RAIN Forecast
Although the company’s phase 3 trial failed, RAIN stock could be a bargain at its current dip since it still has 2 treatments in clinical trials. Considering Mantra-2’s impressive phase 1 results, the ongoing phase 2 trials could be successful too which would make the treatment closer to FDA approval. With a cash position of $110 million, investors should not worry about RAIN diluting anytime soon since its cash position is enough to complete all of its trials. Given that RAIN stock is extremely oversold and is witnessing an increasing short interest rate, a short squeeze could occur soon.
