Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
His forecast includes diseases and geographies that mine doesn't. Those are real opportunities, but I didn't bother with them because it doesn't change decisions for me, and that's all I care about. I think he is too aggressive on market share. His share count is low but when he wrote it, it was correct.
yup, that's what I'm worried about.
As things develop, I may increase my valuation expectations, but all sorts of things can happen along the way...good and bad. If I get too aggressive on expectations, it can screw with my head, and I start making more mistakes. 5x return is all I need to know right now.
Internally we've been at $500M - 750M peak sales.
500M x 4x => 2,000M Enterprise Value / 850M shrs => $2.35 / shr. Given it's a one product company with a finite exclusivity period, we will do a DCF when we have time and refine the revenue multiple. For now, whether it's 3x, 4x, ... it doesn't matter.
Guggenheim analyst -- who put a lot of time into his research -- has:
3.5M off-label Avastin injections per year, which is in line with our proprietary retina market model. Conservatively, we think the company will be able to convert ~1/3 of these patients to branded Lytenava for ~1M injections per year. Assuming a WAC price of $500 per injection and a GTN of 20% (in-line with similar products) we estimate peak sales of $560MM
BTIG:
~70% of retinal specialists use compounded bevacizumab as a 1L regimen for their wAMD patients before proceeding to other Tx options. This is largely owed to its attractive price point compared to other anti-VEGF therapies (~$55-$75 per injection vs. ~$2,000 for Eylea and Lucentis vs. ~$1,200 for biosimilar Lucentis) and well-established non-inferior efficacy vs. Lucentis. There are estimated to be over 740k wAMD patients in the US currently pursuing Tx, so the utilization of compounded bevacizumab is substantial despite the disadvantages of the treatment option (discussed further below).
I meant peak revenues, not peak returns.
- To forecast stock returns, we forecast peak revenues, multiply by not too high a multiple (since this is a one -- not first in line -- product company), and then divide by 750M - 850M shares. This value is a lot lower than it used to be (due to the share count) but still a lot higher than it is now.
I paid $0.35 (or lower if the stock drops...but it doesn't look that it will) for common plus warrants (with a strike 10% above the purchase price). The warrants are callable, so the company can raise a significant amount of additional capital from the warrants.
I was referring to Kurt J Hilzinger.
What I've written in the past fairly captures my views. I don't try to promote my stocks. I try to be honest. I don't care if others buy, sell, or short my companies.
- Company management had a serious lapse of judgment in mis-designing their trials historically. They claim they were given informal support (not an SPA) from the FDA in 2018 but the 2023 FDA determined they did not provide adequate support for approval. They lost many people a lot of money including their biggest shareholder, who has a board presence. Another well-known board member bought significant stock in the open market above $1.00. So, clearly the people best positioned to judge, misjudged. It happens.
- I discussed this trial design concern with them historically and I accepted their explanation about feedback they received in 2018. That was a serious lapse of judgement on my part. Most retail investors would be surprised to know how often professional investors make mistakes. I've made lots of mistakes yet have become quite well off. We don't have perfect foresight, but we do know how to manage risk.
- The company now has an SPA, so the odds of approval are high. There's never been much debate regarding the efficacy and safety of the drug.
- Shortly, the debate will shift to what market share the company will achieve upon commercial launch. Longer lasting treatments are better, but insurance companies still utilize step-edit programs to hold down claim costs. These longer lasting treatments could push down pricing of biosimilars, which could pressure OTLK. Can I precisely predict all these effects? No. But I know what to look for and I know that OTLK doesn't need too much share of the total market to achieve meaningful revenue.
- After the recent raise, there are a lot of shares outstanding. About 750M. If you look up the share count from various sources, you'll see a much lower number but those are lagging. We go through the existing placement agreement and the note amendment and model out what the future share count will likely be.
- To forecast stock returns, we forecast peak returns, multiply by not too high a multiple (since this is a one -- not first in line -- product company), and then divide by 750M - 850M shares. This value is a lot lower than it used to be (due to the share count) but still a lot higher than it is now.
- So, even though I 've lost a good amount of money, I'm probably going to make a good amount of money before the fat lady sings. Unless, of course, she falls on me first.
I did lower my cost. I'm one of the participants in the private placement.
I wouldn't say that. I just know there was a lot of demand and the participants in the transaction are mostly investors, not traders.
Citadel Among Hedge Funds That Got Morgan Stanley’s Block-Trading Leaks
- Bloomberg
"Morgan Stanley paid a $249 million penalty to end the probe. Pawan Passi, who ran the bank’s US equity syndicate desk when he was put on leave in 2021, was barred from the industry for a year by the SEC."
"Representatives for the bank and hedge funds declined to comment or didn’t respond to messages."
When I came out of my fancy business school and went to work for a hedge fund in the 1990s, I thought I was supposed to compete on my smarts. Took me a year to realize it was access to information that mattered most.
Yes, still around, but I haven't read the board more than once every 4 - 6 weeks. If I had something unique to add, I would...unless I was under NDA of course. Then it would be best if I kept quiet.
There will be a shareholder vote.
1. approve the shares to be issued in the transaction (since more than 20% are being issue).
2. give the board the ability to enact a reverse to stay on NASDAQ.
The price of the issued shares is the lower of (a) $0.35 and (b) the average price leading up to the shareholder vote. So, if investors focus on the reverse, maybe we can see weakness and "b" above will apply. But this deal brought in a lot of new institutions, and I think most of them don't have a full position. So, this may be one of those rare circumstances where a reverse doesn't hurt the stock.
We now have a clear path to FDA approval.
SPA => short trial => data about Oct 24 => filing Dec 24 / Jan 25 => approval summer/fall 25.
The demand for the deal was very strong, demand more than 2x greater than supply. Many institutional investors got zero. Others were cut back 50% - 75% (including me).
Not my base case expectation but it's possible.
Launching a product takes some additional investment, so I don't think that will save them. The company will raise funds either through the sale of common stock or through the sale of a royalty, in my view.
1. Common stock. I think this is most likely. They will likely need to add some warrants to the mix.
2. Royalty. These take a portion of revenue until the investor receives some multiple of the initial investment. The more risk, the higher the multiple. I would guess 3x - 4x in this case.
As noted in my earlier posts, I first thought this was an easy approval since management was following guidance* they received from the FDA in 2018. The key decisionmaker changed at the FDA and the new sheriff made a different decision in 2023.
My mistake was thinking that the FDA would make the decision with the highest utility (e.g. we know the drug works, current off label present safety and efficacy risks, as emphasized by the recent Pine Pharma recalls). Instead, the FDA acted like bureaucrats, indifferent to utility. In hindsight, trying to explain why I expected bureaucrats to not behave like bureaucrats is impossible. Frailty of the human mind!
But your question was more about confidence. To answer that question, I would focus to four items.
1. Is the drug safe and effective? I have yet to hear anyone, including bears, claim otherwise**.
2. Can OTLK get FDA approval? Here's how I think about it. OTLK is providing a written plan to the FDA specifying their interpretation what the FDA indicated would constitute substantial evidence of safety and efficacy, as discussed verbally that the recent FDA meeting. The FDA will then confirm. So the risk of approval comes down to whether OTLK can follow directions***. That's a judgement call but, as long as FDA guidance is clear, I will probably bet money that can. OTLK is considering if they should seek an SPA at this point, which will be binding guidance. It will take longer than less formal guidance, but the tradeoff is the cash burn while they wait.
3. Can they raise the funds needed? My short answer is yes. But, as I discussed in an earlier post, this is the crux of the problem. The return for shareholders generally is how much dilution takes place between now and (the highly likely) approval.
4. How will the competitive landscape change over the next two years? My primary concern will be if biosimilars price lower than their current preferred range around $1000 p.d. Historically, biosimilars cos. do not follow a low-priced strategy but the recent approval of high-dose Eylea and the strength of Vabysmo could pressure biosimilars to lower price, putting pressure on the OTLK business model. So, there are arguments either way. My approach on these types of risks is to be aware of them and but to defer conclusions until evidence starts to track one way or another.
* Guidance, not an SPA (though they have those on other indications)
** Even the bears didn't predict an FDA failure, they made other arguments. Better lucky than smart is the oft used wall street phrase.
*** provided we don't have another change in FDA leadership
I don't think the meeting has taken place yet. They may have gotten a written response from the FDA to their meeting request (which include questions they would like addressed at the meeting).
I'm confident the product will be approved at some point. The question is when and what amount of dilution happens before then. Management seems confident they won't need another clinical trial but, since the upcoming FDA meeting hasn't happened, it's based on management review of the situation and the briefing docs they assembled.
Is management's confidence an indicator, yes. Might they be surprised by FDA feedback? yes.
I wish the conclusion was obvious, but we're still in a period of high uncertainly.
there are Avastin/ophthalmic shortages currently with the largest Avastin compounding pharma: https://www.asrs.org/clinical/clinical-updates/9342/Pine-Pharmaceuticals-Announces-Voluntary-Recalls-Including-Avastin
The FDA should care about this. Getting a safer, more consistent product on the market was always the main OTLK value add, and this confirm the need for such.
important clarification: the form 4s were option awards, not open market buys.
still, the board could have taken cash compensation, but didn't. this is consistent with past practice.
What you're thinking is correct: management thinks approval can be achieved fairly near term without a dilutive financing down here. This confidence is consistent with recent management conversations.
I've offered them a direct investment if they needed it. No interest so far.
The company is evolving (e.g., better communications) and institutions will want a deeper staff of industry veterans. But that won't stop them investing. They'll invest and expect part of the increased future valuation to coincide with the company's evolution.
nope, new money
yes, the fact that they were transparent and were specific, counts for a lot.
No, actually I bought at the end of September. I'm just not a child about these things.
Oh no, you have that exactly backwards. I would have never dreamed I'd get the opportunity to buy OTLK so low. Of course, I got the approval wrong in the short term. But my money is often made off the mistakes of others. I take advantage of mistakes. I fix problems.
ISRG, XMSR, NWBO, many others.
okay, I get it.
and the eye rollers have been particularly helpful. 😍
Vator, I've done very well economically by just seeing things as they are -- both good and bad. People that have been too negative, by and large, have presented me investment opportunities that I've been happy to take.
I like today’s press release. Sure, I wish everything happened on schedule, but the world doesn’t work that way. What I like is that NWBO is communicating with its shareholder base. You’re all adults, sell if you want but the DCF hasn’t really changed at all.
For all of you that are going to respond by saying NWBO rarely meets their schedule, here's my response in advance. Investing is driven by information that changes prior views. Getting DCVax approved is major challenge and the company has gotten it further than most people would have imagined possible. It's been slow and hard but we're on the precipice. Does today's press release cause me to believe anything different than I believed yesterday? Of course not. All it does is take the stock price down for a time and take a skip out of our steps for a while.
So, please don't fill up my inbox with poorly thought-out comments.
But to be clear, I don't trade anymore. I'm a fundamental / longer term investor. So, I'll wait until the Type A and then determine next moves.
I don't think Genentech cares much. We do know high uncertainty now, which will be dissipate after the Type A meeting. Unless the Type A is a disaster, seems a good trade.
Total enterprise value is $60M (equity cap) + $37M (debt) + ~$100M (new money to fix the application and get to commercialization), or about $200M total EV. If approved, the company should be worth a significant amount, so new investments can provide 5x - 20x return. That's a wide band because it very much depends on the price of the equity needed to repay debt and to fully commercialize.
Expecting to spend time with mgmt next week. Don't expect anything new but I'll let you know if there is. Until the FDA meeting, I think the company can't tell us more than what they have.
How am I feeling about this? Disappointed in myself for misjudging but I can't color any future judgements with negative emotion. So, the simple answer is I am data dependent. If FDA feedback convinces me there's a pathway to approval, I will add to my position. How much will depend on price. The company has significant reputational damage and a need for capital, so the price should be low. I wouldn't be surprised if I increase my position substantially (3x+) under the right terms. But there are scenarios where I sell and move on. Those involve the inability to solve the capital problem.
Agreed, there is no discussion of a reverse split other than on the message boards.
I see other messages to me, but I'm in the middle of another transaction, so can't address those now. Later guys.
Too early to say.
LC, I'm doing what I always do. I'm being honest. Why are you even over here? This is a nicer neighborhood (than NWBO) and it would be nice to keep it that way.
I'm not sure if this is a serious comment or just written out of frustration. But let me lay it out:
1. I wasn't in charge of the BLA application, and I lost money right alongside everyone else. Several million dollars in fact.
2. The company will need more money. They will get somewhere.
3. The company will be better off getting it from me than from many others. I invest in companies that I think can have large increases in value and I like to be part of solving their problems (usually a capital problem but sometimes other issues). I can make decisions fast and I tailor my investment to company needs.
4. There are funds out there that are indifferent to the stock returns. Those are the vultures, because they can win retail is losing. Since I lost money alongside you, you know that I'm not that kind of investor.
5. Yes, it's true that I will get a bit better deal than retail. Since I may invest $10M - $30M, I get the Costco discount. The point I made earlier -- that the existing lead investor will negotiate hard on behalf of (itself and) all shareholders -- means the discount will be as small as possible.
6. Once I invest, we will sink or swim together.
Life is full of surprises, exwannabe, we fully agree :)
Obviously, OTLK was a major disappointment since the CMC issues shouldn't have been a problem. They were not dealing with a novel process, so it looks like a competence issue. This is the second self-inflicted BLA problem, so one has to accept this as part of the investment risk. The "substantial evidence" is indeed a wildcard. After several calls with management, I still can't pin down the time to remedy. What I am sure of is it can be remedied, but at the cost of time and money.
So, what's my strategy? Subject to the Type A meeting feedback, I will offer the company additional capital. If the valuation is low enough, I will increase it substantially. However, the company has a lead investor that owns 25% and they won't want dilution beyond the minimum necessary, which benefits all existing shareholders.
At some point, investors may worry about a reverse split to stay on NASDAQ. It might be necessary, but it won't change what I do. My perspective is always what is the company worth in total, and that depends on the long-term business prospects.
So, just have to be patient and flexible. I still expect, in a year or two, to have a large profit in this name.
Strategics generally don't like uncertainty. The folks making the decisions have more downside for mistakes than upside for great wins. So, they are pretty risk adverse, and I don't see that as an option here.
I have though all along that, after commercial sales are established, this is a clear buyout if revenue growth is solid.
The company is cutting expenses to extend their runway, I'm sure. So $16M/qtr burn probably goes to $8M/qtr. Once they renegotiate the debt maturing at year end, then they should have runway sometime in 2Q'24.
They put themselves in a tight spot, no doubt. But I can see a pathway back if they're smart. This, unfortunately, was self-inflicted mostly. The drug does work.
This is just the kind on investment I've done many times. I'm pretty sure the company doesn't want to dilute down here and will wait until the Type A meeting to develop a plan. Some additional capital will have to be raised but the amount will depend on the Type A. My current estimate is about 30% dilution so, simple math is take everything you thought before and multiply by 70%.