Here is another post from JD.
Thank you for taking your time to post that. Very informative.
Very positive in my opinion.
Introduction
For a long time scientists have believed that p97 (melanotransferrin) offered strong potential as a transporter of drugs across the BBB into the Central Nervous System (CNS). There has been good evidence to support this, lots of it found in the papers on the biOasis website.
But, as investors now understand, the p97 molecule is not really commercially viable because it's too large and too expensive to manufacture. MedImmune apparently put a lot of effort into p97, without getting a commercial solution, it seems. Their agreements with biOasis would seem to illustrate their belief in p97, in the value of the small peptide versions of p97 and in the IP protection that biOasis has to protect the Transcend platform.
Many other companies are working on means of crossing the BBB, from Shire's intrathecal pump, to methods of physically opening BBB gaps, to nanotechnologies, to Roche's (Transferrin-based) Brain Shuttle. None show the commercial viability, practicality, universal capabilities and, yet, selective transport qualities that Transcendpep shows.
So for investment purposes we're going to make an informed assumption, right here, that Transcendpep from BiOasis Technologies Inc (V.BTI) could be a major player, if not the only major player in the transport of all types of drugs and therapies across the BBB, if it continues to show success and safety.
The BBB transport vector potential market can easily be estimated at $100 billion or more per year. Calculations would include oncology at $20 billion or more, pain management (anti-TNF or related therapies) at $30 billion or more and 100 to 200 drugs and programs that could each produce a billion or two per year. The need for a effective BBB vector is immense. If one company had all of those blockbusters, that company could be the biggest pharmaceutical company, by far. (J&J is the largest with revenue in 2013 of $71 billion.)
But it's essential that investors understand the significance of Transcendpep. Transcendpep is a family of small peptides that preserve p97's transport capabilities but do so in a commercially viable (relatively inexpensive) manner and they do it without significantly increasing the size of the original unconjugated drug. It is a platform technology meaning that it is a technology upon which an almost infinite number of drugs and therapies can be developed, patented and commercialized.
Transcendpep is the small "hook" that when grafted onto drugs (conjugated with them), will allow the Blood Brain Barrier to transport those therapies across the cell membranes in a process called "receptor-mediated transcytosis."
Some of the Transcendpep conjugates should be prime candidates for fast track FDA approval by virtue of the immediate need for them and because they will be conjugates with already-proven drugs (such as Herceptin). This means that pharmas should have shorter and cheaper paths to commercialization and less pipeline risk, making Transcendpep and biOasis even more valuable. Some of us have written about the compassionate and fast track FDA approval of drugs. We consider some of these to be "low-hanging fruit" in the Transcendpep catalogue. BT211X the LSD programs are two obvious examples of programs that could receive such fast FDA approval.
Another avenue for business development and commercial agreements for biOasis is in research. Recently biOasis announced that Transcendpep is capable delivering siRNA (small, interfering ribonucleic acid) across the blood-brain barrier and into brain cells. It seems that siRNA will not be commercialized for a long while yet, if ever, but a lot of research could benefit from the availability of an effective BBB vector. BiOasis could charge for the research services they can offer and perhaps include future licensing options in any signed agreements. Transcendpep could be very important for the siRNA players. There should be many other research opportunities for biOasis in very early stage R&D programs with multiple pharmas.
People use the term "Holy Grail" to describe breakthroughs. Transcendpep could be one of those. Simply put, the markets are large and unmet. Most large pharmas and several small biotechs are either working on CNS drugs or are interested in doing so. Further, there is an existing long list of drugs, either on the market, orphaned or in development, that require a BBB vector for them to be useful and commercially viable. The question isn't whether opportunity exists, it's what opportunities to choose first if Transcendpep remains successful.
Why Now?
So why should a deal happen now? Opportunity and threat. It's that simple. It's partly because the Transcendpep opportunity is available NOW for conjugate development and licensing. Companies must act when opportunities present themselves. If they don't act, somebody else will beat them to it, either eliminating an opportunity or destroying the viability of an existing program by making it obsolete or ineffective in comparison to a competing Transcendpep program.
But it's also because of MedImmune, the elephant in the room. MedImmune has already had sufficient success with Transcendpep (and confidence in its patents) to advance to a second phase of development with Transcendpep conjugates of several preclinical drugs. Not only does MedImmune have a head start but this second phase agreement is a signal to other pharmas that they can have enough confidence in Transcendpep to at least have a serious look at it. (It also allows biOasis to require higher up front payments - no more tire-kicking cost-basis collaborations.)
But MedImmune is well ahead of other pharmas in this regard. It's believed that each MedImmune drug program has its own completion timeline with some programs expected to have early results (3 to 6 months), others to be a little later. BiOasis maintains that they will only enter agreements that restrict pharmas' ability to delay things. This mean that reporting and making licensing decisions will likely be driven by time limitations defined in the agreements.
We're pretty sure that each drug has its own licensing terms, as well. It would seem obvious that each MedImmune drug under evaluation must be separately defined and valued in these ways because one or more programs could fail. Therefore, we would expect that individual timelines and values would be pre-defined. This could mean that MedImmune might report results, on single or multiple drugs, at any time. We could see licensing agreements implemented at any time in H2, 2014, and some in early 2015.
NOTE: Just because Transcendpep can get a drug across the BBB doesn't mean the drug will work after it gets there. Many drugs to be tested with Transcendpep are unproven, preclinical drugs. MedImmune's Transcendpep drugs are described as preclinical so therapeutic success may not be guaranteed. Also, MedImmune may have more than one preclinical version of a therapy in this evaluation and part of this new agreement may be to find which of them is worth pursuing. We shouldn't expect all MedImmune Transcendpep conjugates to move forward.
But here's the issue for other pharmas. MedImmune, if it sees that multiple conjugates are successful, could make a preemptive bid for biOasis instead of licensing multiple conjugates. They could possibly buy the company for a price not much different than the sum of the prices for the individual licenses. That buyout bid or the framework for pricing it, could already be included in the MedImmune agreement with biOasis. We just don't know that. Also, any other pharma on the outside watching biOasis could make a preemptive or competing bid to prevent MedImmune from acquiring biOasis.
This has got to be scary for many pharmas. There is no guarantee that the other pharmas could gain access to Transcendpep if biOasis is acquired by MedImmune, or by some other pharma. Any buyer of biOasis could at the very least put a moratorium on new Transcendpep licensing deals until it has decided what kind of in-house pipeline it wants to develop with Transcendpep.
Also, an acquiring pharma like AZ could launch an acquisition spree if it owned Transcendpep. Other pharmas and biotechs with no avenue open to them to get their CNS pipeline drugs across the BBB could very well be compelled to sell these programs to AZ or to whoever else might buy biOasis.
Some of these companies, especially biotechs with small pipelines and little or no revenue, must view the MedImmune/AZ/biOasis relationship as an existential threat, others seeing it at least a threat to their CNS pipelines. Therefore, they must either take a chance that they can deal in the future with biOasis or a new owner of Transcendpep, or they must make deals now, before MedImmune or some other pharma can buy Transcendpep and exercise full control over it.
Further, biOasis must not allow itself be in the position of negotiating a buyout with MedImmune or anybody else if the share price remains low and if no other pharmas are publicly showing interest. BiOasis must get investors to start pricing this stock in a manner that expresses the potential of Transcendpep, a price that recognizes not only the potential of at least some tens of billions in future sales per year, but also the hundreds of millions of revenue that biOasis could almost immediately start generating from licensing agreements.
Whatever licensing agreements that might materialize could EACH immediately bring in $5 million to as much as $30 million in up front fees and a total of hundreds of millions in milestone payments in the first 2 or 3 years of existence. LSD, alone, could generate $30 million or more in the first six months of an agreement and $300 million or so in milestone payments over the next 2 to 3 years. And that's just for one of the smallest programs that biOasis has available.
Obviously, with a current share price of only $1.20, biOasis needs to generate awareness of Transcendpep and an appreciation of its value. There can be no greater expression of confidence in Transcendpep, its commercial value and its patent protections than having pharmas, large and small, make deals with biOasis for the development of their CNS pipelines. BiOasis needs deals almost as badly as the pharmas need them. I say "almost" because biOasis can develop its own CNS pipeline (and should already be more proactive in that pursuit).
The bottom line, biOasis is both a huge opportunity and a huge threat to pharmas. Whether the pharmas have their own drugs to get across the BBB or they want to license something like BT211X, they must get that deal done now or risk not getting a deal at all.
There are lots of rumours coming from multiple directions that biOasis is very active in deal-making with players that are completely new and unknown to investors. If the rumours turn out to be true, it really shouldn't be any sort of surprise given how important a capable BBB vector will be and how much of a threat current collaborations pose to the many players in the CNS space.
I anticipate one or two deals between pharmas and biOasis before MedImmune can get any of their evaluation programs completed, meaning deals could happen literally any day now.
$20 to $50 - Why and When?
It is my belief, and has been for a long time, that when the biOasis story gets fleshed out with enough scientific information and commercial news, and when that information and news has penetrated the biotech, financial and popular media, that investors will bid up this stock in a very aggressive manner. I think it's highly probable that in 2014 investors will bid BTI up to $20, at least, with potential for $50 and higher.
BiOasis has identified something like 200 therapeutic candidates (drugs, biologics, therapies, small molecule drugs, gene therapies, enzymes, etc.) that Transcendpep should be able to transport across the BBB. Let's have a look at just one, Lysosomal Storage Diseases (LSD)
A licensing deal for LSD will probably include a few millions up front, $20 million or $30 million after initial animal studies are completed (3 to 6 months after deal signing) and several milestone payments at various stages over 2 years or so. The total license when fully acquired should result in somewhere around $300 million being paid to biOasis.
Most people agree that such a deal, in its own right, should be immediately worth a biOasis share price of $5.00 or more. But when investors realize that there is potential for dozens of deals for 100 to 200 drugs, that MedImmune, if their Transcendpep evaluations are successful, should be only weeks away from multiple deals, probably of similar or greater value than an LSD deal, then those investors are going to understand that the Transcendpep platform could eventually support annual drugs sales of tens of billions of dollars.
When analysts and investors get the picture straight in their heads, this stock cannot sit at $5 or $10. There's no middle ground. Transcendpep is either worth nothing or a billion to two billion dollars, right now.
Months ago I mentioned Synageva on this forum. They're in the LSD business, or at least they have LSD programs. They have one non-CNS drug in clinical trials and one (SPS-103) that is for the LSD, MPS III. That means that Synageva is in business with a small subset of the LSD business that biOasis is capable of entering.
Synageva (Q.GEVA), with about 30 million shares outstanding, has a low for the month of June of $76.63, on June 6. That low represented a market cap of about $2.3 billion. That's for a company in the LSD business with less potential in the LSD business than biOasis has. (Synageva has almost $600 million in the bank. Subtract it if you want. It's still a big market cap.)
Today Synageva closed at $95.15. Since June 6, GEVA's market cap has increased by over $550 million to almost $3 billion. This month Synageva's market cap has INCREASED by an amount that is TEN TIMES greater than biOasis's market cap!
And biOasis not only has the key to LSD but they have pipeline potential for 50 to 100 times the value of the combined LSD markets!!
Nobody can tell me that the biOasis market cap isn't going to shoot upwards as soon as a couple of deals get done, BT2111, gene therapy or LSD, MedImmune, it makes no difference, and as soon as an understanding of biOasis's potential isn't known!!
There is no argument that can be made against valuations of at least $20, probably $50, and possibly higher. And because pharmas must act now, those valuations will be seen this year.
I could be more dramatic about this. I could present numbers (NPV calculations, etc), and I have done so in the past. But what's the point! I'm not trying to convince anybody, not really. I just want to be on the record as predicting this.
And that's what I'm doing. This stock will see $20 to $50 this year unless biOasis fails to pull some triggers. That is the biggest fear I have, that because biOasis in the past has shown such debilitating hesitation to act, that they'll hesitate until some pharma offers them something silly like $150 million for everything, and biOasis will have little ammunition to avoid such a terrible deal, other than to do what they seem to have always done, wait for pharmas to come knocking on the door with other offers in hand.
The rumour right now is that there are a couple of unknown companies who want to make deals, one of them for LSD licenses. (And it's not Shire. Whoever it is is new to us, apparently.)
So get it done, biOasis, before MedImmune has to think about buying the company. I'm all finished celebrating a 7¢ gain like we saw today when another player, with less, has had a $550 million INCREASE in market cap in two weeks, with far fewer good reasons for it!
Thanks again John.
