Onconetix's 1-for-85 Reverse Split: A Desperate Gamble or Strategic Lifeline for a Troubled Biotech?

Henry RiversWednesday, Jun 11, 2025 12:35 pm ET
51min read

Onconetix, Inc. (NASDAQ: ONCO) is taking a drastic step to avoid Nasdaq delisting with a 1-for-85 reverse stock split—the most aggressive such move in recent biotech history. While reverse splits are often a last-resort tactic to prop up share prices, Onconetix's decision raises critical questions about its strategic rationale, the risks of its financial fragility, and whether the company can leverage its remaining assets to turn the tide. Let's dissect the move and its implications for investors.

The Reverse Split: A Last-Ditch Effort to Stay Listed

Onconetix's stock has been in freefall, plummeting 98.96% over the past year to trade as low as $0.05 per share—far below Nasdaq's $1 minimum bid price requirement. The 1-for-85 reverse split, set to take effect on June 13, aims to lift the stock price above the threshold by consolidating 44.4 million shares into roughly 522,000 shares. This drastic reduction (a 98.8% cut) underscores just how dire the company's position has become.

But reverse splits are a double-edged sword. While they can buy time with regulators, they often signal to investors that management is prioritizing survival over growth. For

, the move also comes amid multiple red flags:
- Financial distress: The company reported a trailing twelve-month EBITDA of -$7.4 million and a current ratio of 0.05 (far below the 2:1 threshold signaling liquidity health).
- Regulatory risks: It has missed Nasdaq's filing requirements for its March 31, 2025, quarterly report and faces a potential delisting hearing.
- Shareholder dilution: The reverse split will eliminate fractional shares, potentially stripping smaller investors of their stakes.

Market Implications: A New Start or a False Dawn?

The reverse split could temporarily stabilize Onconetix's stock price, but its long-term survival hinges on addressing deeper issues. Here are the key market dynamics at play:

1. The "Fresh Start" Narrative

Investors often give companies a short reprieve after reverse splits, as the higher stock price can attract new buyers. For instance, shares might briefly jump to $1 or more if the split lifts them from pennystock levels. However, this is purely a technical fix and offers no guarantees.

2. The Debt Overhang

Onconetix's debt-to-equity ratio is alarmingly high, with total liabilities exceeding assets. Until it resolves this, the company risks default or forced restructuring—a scenario that could make even a stabilized stock price meaningless.

3. The Merger with Ocuvex: A Hail Mary?

Onconetix's non-binding letter of intent to merge with Ocuvex Therapeutics, under which Ocuvex shareholders would own 90% of the combined entity, is a critical wildcard. If the deal materializes, it could inject fresh capital and expertise. But such a heavily tilted deal raises questions about Onconetix's perceived value—investors may see it as a backdoor listing for Ocuvex rather than a true merger of equals.

Investment Catalysts: What Could Turn This Around?

While Onconetix's fundamentals are shaky, there are potential catalysts that could shift sentiment:

Proclarix's Clinical Data

The company's prostate cancer diagnostic tool, Proclarix, recently presented new clinical data. If it gains FDA approval and secures a licensing deal with Labcorp (as reported), this could generate revenue streams and partnerships.

Reverse Split as a "Clean-Up" Move

By reducing share count, the split could concentrate ownership among fewer shareholders, potentially enabling more decisive strategic moves. However, this also risks alienating retail investors who hold small stakes.

Nasdaq Listing Status

If the company secures a favorable ruling in its delisting hearing and maintains compliance post-split, it could regain access to capital markets.

Risks and the Bear Case

The risks are manifold:
- Missed deadlines: Onconetix has already failed to file its Q1 2025 report. Further delays could trigger delisting regardless of the split.
- Merger pitfalls: The Ocuvex deal is non-binding, and Ocuvex's own prospects (if any) are unclear.
- Proclarix's limitations: Even if approved, Proclarix faces intense competition in diagnostics and may not deliver sufficient returns.

Investment Take: A High-Reward, High-Risk Speculation

For most investors, Onconetix remains a high-risk, low-conviction bet. The reverse split and merger offer potential upside, but the company's financial and regulatory challenges are existential.

Recommendation:
- Aggressive traders: Consider a small speculative position with tight stops (e.g., 50% loss triggers), focusing on short-term volatility around the split or merger news.
- Avoid for now: Retail investors lacking risk tolerance should steer clear. The stock's 52-week low of $0.05 suggests further downside if catalysts fail.

Conclusion

Onconetix's 1-for-85 reverse split is a bold move, but it's ultimately a band-aid on a gaping wound. While the company is attempting to buy time, its survival depends on resolving its debt crisis, executing on Proclarix's potential, and navigating regulatory hurdles. For investors, this is a story of desperation tinged with opportunity—but only for those willing to bet on a turnaround against steep odds.

Final thought: In biotech, hope often outlives reason. Onconetix's story will test both.