Venaxis Inc fka APPY

[cjstocksup]

Daniel called it~ APPY gets a nod from Daniel Ward at seekingalpha as one of the top biotech picks for 2016:

Venaxis (NASDAQ:APPY) - 15% Allocation: Venaxis is a new name to my Top Value Biotechs list. Venaxis is an in vitro diagnostic company developing and commercializing its unique multi-biomarker diagnostic test, the APPY1 test. While the name popped 50% within a few days after I initially discussed it in a spotlight piece back in April, the name has lagged since. When I wrote about the name in late July, I expected the company to would likely follow up with a Q3 business update on the path forward with APPY1, but the company has been extremely quiet. Two main points I would like to highlight are as follows:

1. Sale of Headquarters: The only piece of news that has come out since the last business update in late June is the fact that the company sold its corporate headquarters in Castle Rock, Colorado. The company announced through the 8-K filed on October 21st that it sold its headquarters to Niebur Golf Development, LLC for $4,053,000 with closing expected to take place in December. The company expects to generate $1.7 million in net cash from this sale after expenses and mortgage payoffs. Post-closing the company will just pay a lease payment of $22,000 per month. Why would a company sell its headquarters? The sale cleans up the balance sheet in that the company will get $990,500 in cash at close and will receive a note receivable for the remainder of money owed. The company can pay off debt and is now only committed to a lease that can be ended with 60 days' notice with the ability to provide notice starting January 31.

2. What is Going on at Venaxis?: Other than the sale of the headquarters, news has been nonexistent. Let's think critically about the one piece of news we have gotten. Cleaning up the balance sheet by taking care of selling the company's main property and equipment is something I view as preparing the company for a strategic action. Additionally supporting this line of thinking is the fact that the company has not had a business update call for six months, which is unheard of and signals to me that they are in the process of a substantial strategic action. Even when considering cash burn of $1.35 million per quarter (the level of cash burn management has guided previously) or even cash burn up to $2.00 million given that we are generally unsure what exactly the company is doing, cash at year end would still likely be between $16.9 and $17.6 million based on the Q3 end cash balance. Adding the $990,500 in upfront cash from the real estate deal would bring this cash estimate up to between $17.9 and $18.6 million. The company may use some of the cash to pay off the mortgage note, but this would not affect shareholder equity. Shareholder equity was $18.9 million as of Q3 end. Based on a market cap of only $9.6 million, the stock currently trades at only 0.5x-0.6x based on book value and cash value. Way back in the June 2015 business update, the company had noted it was reviewing a variety of business opportunities. While I had initially thought the company would just be doing an asset buy in the in-vitro diagnostics space, the company's more or less silence over the past 6 months makes me think they could be reviewing a more substantial strategic action like a reverse merger. If the company were just looking at a more minor strategic action, I would expect them to keep investors much more updated on what was going on with other parts of the business like APPY1 and APPY2.

Concluding Thoughts On Venaxis: Ultimately, given the lack of communication with shareholders, it's hard to predict exactly what is happening at Venaxis. While I think the sale of the headquarters combined with the company dropping off the radar in terms of updates for six months means that the company may be completing a more substantial strategic alternative (such as a reverse merger) that was identified through the business development review, I want to acknowledge that this is merely conjecture as there are a wide variety of things that could be going on at Venaxis. While I do think we may very well see a strategic alternative, it's also possible that the next update brings disappointment in terms of lack of progress with APPY1 and APPY2. With the stock trading at 0.5x-0.6x book and roughly the same ratio based on cash, I think downside is muted though given the balance sheet even if the company provides a disappointing, lackluster update.

http://seekingalpha.com/article/3779066-biotech-weekly-top-value-biotech-picks-for-2016