Tue: Compugen in tailspin, needs help
Compugen’s steep fall in revenue, larger loss, and drop in cash reserves are a deadly combination, but the right strategic partnerships could save the company, which still has plenty of cash.
Shlomo Greenberg
Compugen (Nasdaq: CGEN; TASE: CGEN) has been on an alarming slide since February, and closed yesterday’s trading below $3. The share has already lost 55% of its value, and appears to be on a lengthy downtrend. Since none of its shareholders expected a big profit on their investment in the near future, or at least I hope they didn’t, the reason for the plunge in the share that appears likely to me is a combination of exhaustion and concern. Investors are concerned about the fall in the share on the one hand, and on the other than the company’s report indicates that it is liable to encounter a crisis before it can achieve its goals. Incidentally, these feelings do not exist for Keryx Biopharmaceuticals (Nasdaq: KERX; LSE: KRX). For various reasons, mostly having to do with the company’s management, Keryx’s investors feel more confident.
Compugen reported a steep fall in revenue, a bigger loss, and a $5 million drop in cash reserves in the first quarter. In this industry, this is a deadly combination. I’ve been saying for a long time that companies like Compugen must sooner or later find a patron in order to guarantee a source for the cash that they will need in the future. Compugen already has several strategic partnerships, but what it needs are partners with financing, according to the model exemplified by Millennium Pharmaceuticals (Nasdaq: MLNM). Millennium is a partner of all the leading companies, from Pfizer (NYSE: PFE; LSE: PFZ) to Amgen (Nasdaq: AMGN), all of which contributed to it. A partnership like this will significantly allay the fears of investors who would like to buy genomic shares, but are worried that the money will run out.
Personally, it doesn’t seem to me that Compugen has any real survival worries. They still have enough cash, and they are in the hot and growing genome field. Compugen’s platform is interesting and important, and it all depends now on management’s ability to form strategic partnerships. For speculators and those with endurance, the current share price is probably an opportunity, because a company value of $83 million, when the company has over half of that in the bank, certainly looks interesting.
Savient Pharmaceuticals (Nasdaq: SVNT) is on the way up, which is what I expected. Obviously, the main reasons for its steep rise are its change in management, and its value. For example, is Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA; TASE: TEVA) getting interested again in Savient’s biologics division (which used to be Biotechnology General)? We’ll have to wait and see what happens here.
Published by Globes [online] - www.globes.co.il - on June 21, 2005
The above recommendations were made by a person/s working in the investment industry who may hold positions in securities mentioned in the column. This column should not be taken as advice to buy, sell or continue to hold any securities, and anyone acting on the advice of this column does so at his or her own risk.
Dubi
