Investors from all corners of the market are shrieking to shield their portfolios against a looming recession that’s looking to threaten the market as major league stocks have performed poorly over the last couple of months.
With the Fed’s aggressive rate hike policy as an arsenal to dampen soaring inflation, which hit another fresh high of 9.1% in June, investors are seeking some form of continuity and security in the stock market as conditions only become more choppy.
It’s been a tumultuous season so far, and value investors who bought in May and went away are perhaps now jumping to get a hand back on their portfolios.
Although conditions aren’t favorable, some sectors have been receiving growing interest from investors in the last few months as inflation, and rising interest rates are hurting companies’ bottom line performance.
So while experts and investors are split over the shaky economic conditions, where are they looking now to find a safe haven that can prove to deliver on its performance and return on investment?
Biotech and bioscience stocks have seen a bumpy start to the year, with companies experiencing major stock sell-offs as tourist investors dumped their stocks as interest and hype surrounding the pandemic started winding down.
As investors with no interest or knowledge of biotech left the market, it caused a dramatic drop in prices. The biotechnology sector has now become a hunting ground for hedge funds on the lookout for bargain stocks, and some have already scooped up stocks or even launched portfolios to capitalize on the turbulence.
There’s been a lot of up and down in the biotech market, but some are proving strong and steady against a backdrop of immense economic uncertainty.
As investors are on the lookout for cheap biotech stocks which may have great potential upside, the slow and steady performance of some companies may present viable financial returns in the coming years.
One company of interest in this specific category is Regencell Bioscience Holdings Limited (NASDAQ:RGC), an early-stage bioscience company focusing on the research, development, and commercialization of Traditional Chinese Medicine (“TCM”).
Regencell Bioscience focuses on the research and development of neurocognitive disorders and degeneration, more specifically in ADHD, ASD, and infectious diseases such as COVID-19.
The bioscience company went public with around 2.6 million ordinary shares at $9.50 per share, raising approximately $22.7 million.
RGC has kept investors interested and has received media attention for all the right reasons; the most recent – the company’s chairman and CEO, Yat-Gai Au used over $5.9 million of his personal funds to purchase ordinary RGC shares through the open market to support the growth and potential of the company.
Sizable stock purchases by insider investors, with the CEO being an exception, have helped the company sidestep short sellers and hedge fund managers that have been taking advantage of small-time investors. Currently, the company has just over 2.6 million shares on the market available for trade.
RGC is not ordinary, and in many ways, we can see why investors have started noticing the company.
So far, year-to-date share prices have increased by 17.03% while the Nasdaq Biotechnology Index has only gone up by 2.69%. On average, share prices are zig-zagging between $34.79 and $35.84, and some investors have set up their year range closer to $59.00 per share.
For the six months between July 2021 and December 2021, the company reported a basic diluted loss per share of $0.29, compared to $0.03 for the same period of 2020.
The loss could be attributed to the company’s sudden increase in operating expenses, which jumped from $368,465 for the 6 months ending December 31, 2020, to $3,658,906 for the same period in 2021, an increase of roughly 893%.
The company reported cash availability of $19 million in December 2021, compared to $0.06 million in June 2021. The main source of cash came from net proceeds of the company’s IPO, including proceeds from the sales of over-allotment shares, totaling approximately 22.7 million.
Initially, when the company went public back in July 2021, share prices were well below their current levels, and a month later, in August 2021, share prices jumped as much as 204% in a single trading session. Since going public, Regencell has treated more than 88 COVID patients with over 94% effectiveness in eliminating symptoms within 6 days; they have ongoing ADHD/ASD clinical studies and were included in the MSCI world microcap index. RGC was also one of the top best-performing stocks on Nasdaq in 2021, according to www.stockanalysis.com.
Late last year, Regencell entered preliminary trials for ADHD/ASD. During this time, the stock was trading in the low $20’s range. By mid-February 2022, share prices had climbed over $40 before scaling down to the $20’s range.
Although market conditions have been volatile and investor sentiment negative, RGC has performed quite well since April 2022, with share prices making a swing above $30. The recovery of the stock performance comes from positive clinical results related to the company’s RGC-COV19 TCM formula.
From our view, we can expect RGC to see another price swing in the coming months when the company announces a second clinical study of a standardized TCM formula for the treatment of ADHD and ASD. Regencell has been working to establish an industry benchmark for treatment, dosing, adverse effects, and measuring patient response.
The promising track record and positive clinical results have kept investors interested as RGC has remained relatively stable and resolute in its performance. For investors who can digest small purchases a lot better, RGC could outpace sluggish market conditions.
One of the leading reasons or factors that have made RGC stable is its unique ownership structure. Currently, individual insiders possess over 81% of the company’s shares, a majority that stands to benefit the most from the stock’s relatively good performance so far.
On the one hand, RGC is mostly owned by founder and CEO Yat-Gai Au, who is the largest shareholder with an 81% stake. On the other side of the coin, the remaining shareholders own roughly 19% of RGC stock.
If we had to look at the most recent data, currently, insider owners own at least $333 million of the $416 million business. When studying these circumstances can act as an indication to investors that the majority of owners are executives, managers, and leaders all within the company.
Both general public ownership (11.2%) and private equity ownership (7.6%) are still substantial, and it gives them some power to influence company decisions on performance and growth. Yet, while large enough to play a role, it’s not big enough to change company policy.
As most of the power is vested and held within the company, it gives them better control over the decision-making and their path towards growth. So for investors who are looking to make a jump at RGC, there’s a bit more stability and certainty in its current practice, seeing as board members are investing alongside casual investors.
There’s a tug and pull to this sort of tactic, which can make some investors a bit more wary of the general conditions of the company and its growth potential. Yet, with most of its influence coming from within, performance indicators can be measured based on members’ strategic management and goals.
While the pandemic has affected a majority of global businesses and trade, Regencell was no different, having to increase spending on clinical research that was for some time paused due to local lockdown protocols.
The pandemic has also affected the company’s ability to initiate and complete certain studies and has increased the backlog of regulatory activities. The company saw a significant decrease in available funding opportunities for its clinical studies and research, which only caused increased delays in trial development and results.
There is, however, one positive side to the increased delays. According to the company, they have yet to see any material business disruptions or impairments of any assets as a result of the pandemic. Furthermore, the company has focused efforts on more measurable factors to help them determine its pace of growth as the pandemic evolves.
Although the decision may have placed them behind their competitors, to some extent, it’s still allowed them to readjust as they find themselves in a post-pandemic economy.
There’s a lot of volatility involved when it comes to the performance of biotech and bioscience stocks at the moment, but the rest of the market is also prone to some downturn in the coming months.
While Regencell still needs to build up its portfolio and general investor trust, there’s already a clear indication that the CEO is willing to put money where his mouth is.
Looking to vest more power within the company and less so with shareholders gives an idea that the company is focused and driven to meet its strategic goals. So far, Regencell has a positive clinical trial track record, with board members and executives remaining steadfast in their ability to influence the bioscience market through TCM.
Regencell is in a comfortable position right now and perhaps a good choice for investors looking to have something more stable among the turbulent market conditions. Decently priced, and poised for growth, perhaps RGC is just what seasoned investors need to spruce up their summer portfolios.