Replies to post #9194 on Biotech Values

[DewDiligence]

Re: SNMX

>> these more mundane areas of biotech can sometimes be better investments than the exotic stuff.<<

gfp: I agree completely with that sentiment –the goal should be to invest in great businesses, which need not be based on sexy new treatments for disease.

SNMX: my skepticism has more to do with management’s off-putting manipulation of numbers to define the addressable market than it does with the business per se.

Regarding the “1-4%” royalty rates, these posts by ‘the_busy_ant’ struck paydirt in my opinion:

#msg-4983421
#msg-4985010

On the other side of the fence is ‘rkrw’, who argues that the 1-4% royalty rate must be legit because it is mentioned in the company’s SEC filings and the company was brought to market by “reputable” investment bankers (whatever that means).

rkrw could well be right, of course, but I tend to be a less trusting kind of investor and I do not accept something as the whole truth just because management says so. Regards, Dew

[DewDiligence]

[OT] gfp:

I think you ought to pay more attention to what Jim Haynes is saying on the yahoo COR board. I understand where he is coming from, so much so that at times I feel like I could have written his posts myself.

Investing in small biotech stocks does not have to be about cheerleading. Your boast that the CX-717 trial in sleep dep is “a slam dunk” was ill advised, IMHO. If it were truly a slam dunk, they would not even have to run the trial, would they? Your comment may have excited some readers, but it was off-putting to someone like Jim Haynes –and to me.

What Jim is saying is that all these options and warrants that COR is so talented at generating do matter a lot by reducing Jim’s upside potential in the scenario where things go well for the company and the enterprise value increases several fold.

Contrary to the way NeuroInvest and some others set a price target that is oblivious to the dilution from options and warrants, Jim understands very well just how much these derivative securities will eat into his big payday. This in turn drastically alters the risk/benefit ratio and makes COR a less attractive investment at the current price than Neuro and you make it out to be.

While you post about how wide the therapeutic index ratio of CX-717 is, perhaps the ratio you ought to look at more closely is the risk/benefit ratio that Jim describes in #18940-18941. The fact that Jim used hypothetical and extreme numbers to make his point does not alter his basic point: that you, Neuro, and others are missing something very important in the valuation of COR, and this omission (not ignorance or irrational fear) is one of the reasons the stock price remains in the dumps.

It’s easy for relatively small investors to slant their valuation numbers in COR’s favor. A $12 price target also helps to sell newsletters. However, someone like Jim Haynes who has several hundred thousand dollars on the line in COR can ill afford to succumb to mental laziness or denial. Jim and other very large holders have no doubt factored into their risk/benefit analysis the continued profligate issuance of options and warrants, eating still further into the potential payday.

Remember: Jim is speaking the mind of a very large owner. You ignore him at your peril. Regards, Dew

p.s. I think Jim asked a very good question about Dr. Stoll in #19218 that you haven’t answered yet.