The last time I posted…
I was pulling out my hair, scratching & ripping my flesh, bleeding from my eyes…(you get the picture) I decided to take a hiatus from monitoring this board, & PPHM, in general. I was on full tilt…My assessment of PPHM was falling apart. What I thought was a well thought out assessment of the risk/reward ratio came into question. What the hell was I missing…??? What didn’t I see…??? In addition, I committed the Cardinal Sin of investing…When the share price started to tank, I went deeper and deeper into my cash reserves…Investing far more money than I ever planned to invest in this high risk high reward biotech. And it kept on tanking…I’m 65 years old…Not enough runway left…Good Grief…!!!
Nothing, absolutely nothing, was going right with this investment. No Cotara advancement. No financing progress…Only more dilution…No trial updates…No partnering deal. The risk portion of the equation was increasing exponentially. Management appeared inept. Financing was a disaster. And, the science started to look less impressive. This is THE time to walk away from the poker table. And I did. Metaphorically only, of course…!!!
My last post (77585) was to drumstick57, on 3-25-12. After that post I needed a break. I spent some time on the eastern Mediterranean Sea, exploring some very interesting vacation spots and calming my frazzled nerves. When I returned I focused on my golf game and only occasionally checked the share price. I went to Atlantic City a few times and played some poker.
I came back to this board and found several thousand posts that I left unread. I skimmed through them. I’m sure that I missed many important posts, and read some gems.
Here are my thoughts as of today:
THE RISK:
The last risk assessment I posted on 3-25-12 was:
“I suggest that you re-read that section in my 73105 post. I concluded that the company’s chance of success was approx. 33% and therefore an investor’s chance of success was about the same…Well not so. In reality, it’s the price you bought it at that determines success or failure. I have my core holdings and I bought, for me, a very large trading position over the last six months. I bought that trading position in anticipation of good financial news by now. My expectations were that NOW we would be trading in the $5.00 to $10.00 range. (NOT AT $0.57). My emotions are clouding my thoughts. This is not a good thing in investing or poker. My risk assessment for me has gone up significantly. I’ve downgraded Management skills, partnering prospects and financial capability. My risks have gone up significantly. I will not average down any longer. My last purchase was at $0.59. I am done buying.”
The components of my risk assessment remain the same:
(Statistical PIII trial success number (66%))* (number assigned to partnering prospects)* (weighted management skills)* (Financing (Dilution impact, etc.))
The first value is the historical success rate for drugs entering PIII trials. In as much as the current PII second line NSCLC trial was designed as a mini-PIII that only lacks a greater number of patients to become statistically significant I will arbitrarily split the difference. (66% + 16% = 82%)
Number assigned to partnering prospects (Was 25%) must now be much greater than 25%. I’ll go with 75%
Weighted Management Skills: Management has taken a beating over the years. However, their plan appears to be working and as I noted before; they have brought onboard top quality personnel. Was 60%; I’ll assign 85%
Financing: (Dilution impact, etc.) was set at 50%. Management has now stated that they are planning to borrow money against Avid’s income. In addition they reported that they received non-refundable deposits for future work to the tune of $7M. This has got to be a plus. Was 50%...Make it 75%...???
New (8-11-12) odds:
(0.82)*(0.75)*(0.85)*(0.75) = 0.392
That’s a better than 1 in 3 chances of success. OMG…!!!
My view of matters as they stand today:
Cotara – Almost a year ago my thoughts were that we would be getting FDA approval for a PIII trial very soon. In my view, that was to lead us into our first partnership. I even tried to calculate what I thought a deal might look like. I’ll repost that calculation and opinion:
“I wrote in post # 73105 the following:
“MILESTONES THAT I WILL USE TO JUDGE THE COMPANY AND MY INVESTMENT IN IT
1- The Cotara meeting with the FDA is very important…But what I expect to occur is a meeting with potential partner/partners soon after. Final negotiation will conclude with these possible outcomes:
a- Management walks away with no deal.
b- Some kind of agreement occurs where PPHM and a partner split the major remaining markets
c- Management seals a deal with a partner that includes upfront money, milestone payment and royalties.
If “a” occurs I will be pissed. If “b” occurs I could be anywhere between annoyed and happy. If “c” occurs I will judge it with the following criteria.
1- If the up front money is around $35M with a 20% royalty I would consider that some what of a capitulation. Why? Because that was the number that was floated by R&R in 2008. What ameliorates that to some degree is the fact that the Stason deal was inked for ~$16M in the interim.
2- My estimate last year of what I think a deal would be worth was between $79M to $137M in up front money, or up front & milestone payments with a 20% royalty. So, if management inks a deal greater than $35M or closer to $79M to $137M I would be somewhere between OK and delirious.”
That was then…
Cotara is now a small side show. It will happen when it happens. All eyes are firmly focused on the main event.
Bavituximab (Oncology) – THE BIG ENCHILADA©. It’s becoming very difficult to ignore the 800lb gorilla in the room. MOS for second line NSCLC is approaching or already surpassed a doubling of the SOC and “May not be reached for some time”. First line MOS not achieved yet. In the next few months (now until Dec.) preliminary data on pancreatic cancer trial will be released. Additional data from the ISTs in Prostate, HER-2 Breast, Liver and NSCLC (Bavi + PemCarbo) trials will be released.
Let’s stop there for on second…At this point it would appear that AA for second line NSCLC is a possibility. PIII for second line NSCLC is almost assured. AND…by the beginning of next year, with a fair amount of certainty, the concept that Dr. Thorpe put out over ten years ago, primarily, that anti-PS is a safe and BROAD-SPECTRUM anti-cancer Mab. is a reality…!!!
I’m beginning to swoon again…!!!
THE REWARD:
If Bavituximab proves to be the broad spectrum anti-cancer Mab that we hope it will be, and that reality sets into the minds of the investment community, and BP, OMG…!!!
Genetech was valued at $65B more or less, with drugs that have serious side effects and provide little improvement in overall survival…what if one Mab can beat the crap out of those statistics and in more indications…???
When will that happen…???
Well, it could take years (Call it 3-5 years from now to arrive at a ~90% certainty) to confirm.
Does BP want to wait for total confirmation before they make a play? NO, HELL NO!
Do I believe management when they say that there is a heightened interest in negotiations? YEP…
SO WHAT WILL A DEAL LOOK LIKE…???
I have no F**king idea.
But I find speculating irresistible…What are some of the options?
1- A buy out.
2- Partnering regionally 2 or 3 separate deals with different BPs.
3- Partnering regionally and keeping the U.S. market for our self.
4- Partnering with one BP with an eventual buy out.
1- A buy out. – This would be great for me as I would get my payoff sooner than later. At what price? Over $65B now…??? Not likely…Value at $65B in five years discounted back to today at 20% per year…??? That’s $21B…Hmmmmm….
2-4 – Any kind of partnering will require up front money, milestone payments and if marketed, royalties. In addition, there will most likely be stock issued to a partner or partners. The permeations and combinations are staggering. I don’t want to go there.
There are currently over 100M shares outstanding. At $21B, that’s nearly $210.00 per share. Likely…??? Maybe not, but why not…??? The $12B buy out price for a company with an HCV drug in PII…??? That’s nearly $120.00 per share. Likely…??? Maybe.
Much less than that, considering all the time I spent, would be very disappointing. (On a sliding scale…!!!)
Maybe old FROOT-LOOPS from the raging bull board was right…!!!
$153.00 a share…
Only 10 years too early…!!!
IN THE INTERIM…
What will keep the light on and progress going…???
The loan that PL talked about in the last CC, a loan against Avid’s revenue stream.
The important thing for me is determining whether the terms are favorable or not. In this area I have no expertise.
I thought that the $10M loan of a few years ago had very egregious terms.
So, again I turn to RRdog or anyone else with knowledge in this area, for information.
What terms would be good for PPHM?
What terms would make PPHM appear desperate?
What if the IB wants the IP as collateral?
What are the upside and downside of any terms?
Will the repayment terms of the loan create negotiation pressure on management?
Concluding a loan agreement will certainly remove pressure in the short term.
Enough for now…I have to check my tomatoes.
Regards
Golfho
