The Power of Partnering on Price.
I have found a development stage biotech company that resemble CTIX in several ways, in that it was founded in 2007, headquartered in Mass and has 3 drugs in clinical development, two of which are thought to be game-changing cancer drugs and one of which is wrapping up Phase 1 with data due to be unblinded in Nov 2014.
This company is also dissimilar to CTIX in a number of ways, the most important of which is its’ market cap, at $2.2B is aprox 71/3 times greater than CTIX’s $300M mkt cap. This company also has no drug in clinical trials beyond Phase 1 and is listed on the NASDAQ. This company’s cancer drugs appear to be applicable to a much smaller range of cancers than Kevetrin and they seem to be focused at rare-genetic cancers caused by gene mutations, although their MOA, which consist of arresting development of the cancer cell by altering the metabolism inside the cancer cell, could be applicable to other types of cancers.
Notwithstanding BOD and exchange listing, why is the valuation of this company so much greater than CTIX? Remember towards the end of the movie “The Wizard of Oz,” when the Wizard told Dorothy’s 3 traveling companions that they already possessed the attribute they were asking him to bestow on them, but they just didn’t have tangible proof of it? Well, the promise of this company’s cancer drugs are no greater than the promise of CTIX’s Kevetrin, but what this company got that CTIX don’t have is a highly esteemed partner, namely CELGENE.
The small cap biotech I have been referring to is Agios Pharmaceuticals (AGIO). They have a collaboration agreement with Celgene for the development of their cancer drugs, AG-120 and AG-221 and Celgene seems to be covering most of the cost. Additionally, Celgene has a 15% stake in the company and recently paid Agios $20M to extend the discovery phase of their collaboration agreement. With the $95M Agios netted from a public offering they were able to end the 2nd quarter (June 30, 2014) with enough cash on hand, $261M, to fund operations midway through 2017.
Many investors, institutional and individual, view this type of relationship, between big pharma and a small or micro cap biotech, as validation for the smaller company’s technology. In an article about Agio by Jim Cramer he stated:
"Yep, Celgene's one of the largest shareholders here, and I totally trust their judgment when it comes to identifying promising early-stage compounds."
Given the effectiveness of its treatments and its partnership with Celgene, Cramer thinks the stock belongs on your radar.
Yup, no doubt about it. The “street cred” (and the street I’m referring to is Wall St.) a large-big pharma confers on a smaller biotech, when they partner is huge and substantial. Celgene is the reason Agio is covered by 5 analysts, including JPMorgan, Goldman Sachs and Citigroup. Celgene is the reason Agio has 10 institutional investors and is owned by 10 mutual funds, including the likes of Fidelity and Vanguard. Celgene is the reason Agios’ stock price has gone from $15.77 on 11/18/2013 to $63.76 on 09/26/2014.
I expect that many, if not all, of these things will happen to CTIX when it partners with big pharma on B and K. On the latter, I expect CTIX’s share price to go ballistic. I believe CTIX’s pipeline is far superior to Agio and I look forward to the day when CTIX’s share price reflect that.
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