Clinical Trial Delay Devastates Arch Therapeutics Inc (OTCBB:ARTH)

With the start of the month the stock of Arch Therapeutics Inc (OTCBB:ARTH) began to slowly lose positions on the chart. The decline was far from alarming though as the daily losses remained minimal. All that changed on August 7 when the company submitted its financial report for the second quarter of the year and on that day ARTH crashed hard wiping close to 13% of its value. Yesterday the stock was depressed even further slashing another 8.4% of its value and closing at $0.275 per share. Were the numbers in the report so horrible that investors decided to immediately sell their shares?

Actually, no, the report showed that ARTH’s finacials are still superior to those of the majority of the pennystock pharmaceutical ventures. As of June 30 the company had:

• $3.27 million cash
• $3.31 million total assets
• $1.89 million total current liabilities
• ZERO revenues
• $1.39 million net loss

The sizable cash position is enough to keep the company going for now and ARTH expects to need to raise additional funds around April 2016.

The dilution of the common stock should be taken into account though. The private placement that took place at end of June saw the company sell 14,390,754 units consisting of 1 common share and 1 Series D warrant for the purchase of 1 share at exercise price of $0.25. Since the end of March through the exercise of Series A and Series C warrants around 10 million shares saw the light of day at $0.20 but at least ARTH received close to $2 million in proceeds in the process. As of August 5 the company had around 100.6 million outstanding shares.

As a whole ARTH appears to be in a stable position so what could explain the drastic change in investors’ sentiment? The answer can be found on page 38 of the report. There the company states that it expects the first clinical trial for the AC5 Surgical Hemostatic Device to be initiated in the fourth quarter of the year. Previously the company had said that the trail should begin in the third quarter and this, yet another, delay could have caused some investors to lose their patience.

Without a new PR to get investors excited the disappointment from the delay of the trial could continue to push ARTH down the chart. And indeed in early trading today the stock is still crashing currently sitting 7.45% in the red at $0.255. 

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