Short seller BMF Capital disclosed a short position in SELLAS Life Sciences Group Inc. (NASDAQ:SLS), arguing the market has “dangerously overvalued” the biotech company ahead of a pivotal Phase 3 REGAL trial readout.
‘Biotech’s Most Expensive Coin Flip’
BMF’s report examines the clinical evidence, statistical design, management history, financing activity, patent disclosures and corporate record behind SELLAS’s nearly $3 billion valuation, describing it as “biotech’s most expensive coin flip.”
The firm said investors have “mistaken a slow blinded event clock for proof of efficacy.”
BMF argues that the trial’s comparison group includes just 10 selected patients, too small a sample to reliably show whether the drug is actually working, and that the trial’s broader statistical assumptions were built on that same weak foundation.
It also raised questions about management’s credentials, as well as repeated shareholder dilution and a failed arbitration with 3D Medicines.
The Trial’s Progress
The Phase 3 REGAL trial is testing SELLAS’s lead drug candidate, galinpepimut-S (GPS), in patients with acute myeloid leukemia who have achieved complete remission after second-line salvage therapy.
SELLAS said the final analysis will follow the pre-specified 80th event (death), triggering a database lock and blinded review before results are disclosed.
Based on BMF’s findings, the firm estimates SELLAS faces roughly 74% downside to $3.50 per share if the REGAL trial fails.
Year-to-date the stock has gained 203.68% and is up 621.86% over the past year.
SELLAS did not immediately respond to Benzinga’s request for comment.
BMF Capital’s Pedigree
BMF Capital is run by Frank Gerola, a 25-year-old Arizona-based short seller whose research platform has built a reputation among traders for blunt, investigative reports on small and micro-cap companies, several of which have coincided with sharp stock declines or regulatory scrutiny following publication.
Its past investigative reports have included Magnitude International Ltd. (NASDAQ:MAGH), a stock that Nasdaq halted in December.
Retail Investors Have Been Bullish
In March, Maxim Group raised its price target from $7 to $10 and maintained a ‘buy’ rating.
The company has drawn heavy attention on Reddit forums, where one user said they own 7,600 shares and are “a big believer in REGAL,” while another said a successful trial could make GPS “a must-ask for facing AML,” comparing its potential impact to Keytruda.
Some have speculated SELLAS could be acquired if the trial succeeds, though others pushed back, pointing to the company’s active warrant inducement program as a reason a buyout is unlikely.
Price Action: On Friday, the stock tumbled 13.15% to $13.21 and gained 1.97% in after-hours trading.
Benzinga edge rankings show SELLAS Life Sciences’ stock has a Momentum score in the 99th percentile and a positive price trend across the short, medium, and long term.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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