On Friday, EMIS closed the session with a 21.67% drop in its share price and closed at $0.94 on an over eight times the average trading volume. More than 2.5 million shares were sold out, and even the perfectly timed press release about some positive clinical study results could not prevent the market from selling.
Last month, EMIS strengthened its poor $400,000 cash position with two share purchase agreements, which have brought in about $6.5 million in net proceeds. Though, it seems that the improved financial condition of the highly unprofitable and heavily indebted business of EMIS did not bring much of joy for investors.
Each of the last two identical capital raising agreements included the sale of an aggregate of 3,497,528 shares of EMIS common stock and warrants to purchase a total of 2,623,146 shares of common stock. More importantly for traders, the company also took the obligation to file a registration statement with the SEC within 20 days after the closing of the offerings, meaning that over 12.24 million new shares may soon substantially increase the supply and respectively lower the share price for EMIS stock.
According to the latest EMIS filing from last Wednesday, which was as by a coincidence a registration statement for securities, the dilution risks are even higher. The company registered a total of 8,140,496 new shares of common stock, issuable upon the exercise of warrants. The surge of EMIS share price on the same day looks strange, but it should be mentioned that 49% of the total trading volume was shorted.
As for the drop off in July, it seems related to the results of a Phase III study, which assessed the safety and efficacy of oral calcitonin in the treatment of osteoarthritis, based on EMIS’ proprietary Eligen Drug Delivery Technology for the improved oral absorption of salmon calcitonin. After analyzing the one-year data for all patients enrolled in the two-year study, an independent Data Monitoring Committee concluded that “although there is no reason to stop Study 2302 because of safety concerns, there is no reason to continue the study for efficacy”.
