Check-Cap (CHEK): What the Hell Has Happened

Medical diagnostics company Check Cap (NASDAQ:CHEK) is a puzzle. In the last two trading days, CHEK shares jumped nearly 190% on a roller coaster ride. Why? Your guess is as good as anybody else’s. There hasn’t been a word’s worth of news coming out of Check Cap since its recent news that it has regained compliance with Nasdaq, which concerns minimum bid price listing requirements.

In order to stay in compliance with the NASDAQ stock exchange’s listing rules, the company has recently executed a 12-for-1 reverse stock split. It’s also worth noting that when companies dip below $1 per share, most institutions and hedge funds won’t buy shares. Thus, the reverse split is a defensive maneuver by management to make a company’s stock more attractive to institutional investors. Is there a new big investor on board?

On March 12, the company announced that it had initiated a post-approval clinical study of the Advanced C-Scan in the European Union. C-Scan is an ingestible capsule for preparation-free colorectal cancer (CRC) screening and polyp detection.

H.C. Wainwright analyst Raghuram Selvaraju believes that the Advanced C-Scan has significant improvement in average colon imaging coverage compared to the C-Scan version used in the previous clinical study that supported the CE Mark approval received in January 2018.

Selvaraju points out that the company may report data from this post-approval study by the end of 2018, and commercially launch Advanced C-Scan in EU through a partner in 2019. Investors should also look forward to updates on the company’s U.S. registration strategy for Advanced C-Scan in the coming months.

Selvaraju rates Check Cap shares a Buy with a $6.00 price target, which implies a 50% downside from current levels. (To watch Selvaraju’s track record, click here)

Check-Cap is a clinical-stage medical diagnostics company developing C-Scan®, an ingestible capsule-based system for preparation-free colorectal cancer screening. Utilizing innovative ultra-low dose X-ray and wireless communication technologies, the capsule generates information on the contours of the inside of the colon as it passes naturally. 

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