Monday, January 21, 2008 7:48:41 PM
I wrote previously that there might be a small advantage to 'inactivating' the application, in that it does not have to go through all the hoops of resubmission. But for our purposes of discussion here, the FDA did deny them permission to go ahead with the trial. It's like an executive being offered the choice of resigning--or being fired.
<<Neuro - What is your sense as to where Stoll is heading this year. Assuming good RD results, would you anticipate Stoll looking for a buyout or would you anticipate Stoll wanting to keep COR going as an independent.>>
The rule of thumb is: You continue operating as if you are going to be independent. If someone approaches you and asks if you are interested in being acquired, that's when the choicepoint occurs. As I have written before, with everything that has happened to Cortex, almost entirely not of their making, I think that Stoll and the BOD would respond with an invitation to discuss price, not a rejection. But if RD is successful, I don't see them accepting an offer under $4-5 per share. Most operating decisions remain the same even if you ar hoping for a buyout, other than not acquiring minor programs that would be irrelevant to an acquirer, and not outlicensing programs that an acquirer would want. Other than that, designing and implementing clinical trials is not going to undermine M&A if that were to occur.
I think a buyout offer is less than 50% likely. I expect Stoll to outlicense RD, prepare CX1739 for the clinic in Alzheimer's (I don't think he's going to pursue ADHD while the red flags are up over Psychiatry), and get a clinical candidate out of the high-impacts. He can then try to do a deal for a lead compound and backup out of each group, leaving Cortex with the ability to develop (and outlicense) other compounds in each group, and to pursue Fragile X, Huntington's, or some other orphan with a high impact.
If RD fails, then he has to rush to try to get that second partnership before the money is gone, and that would be ugly--a less likely scenario, but certainly not impossible. I expect that Mark Varney will be CEO if Cortex is still independent in 2009.
NeuroInvestment
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