Intelgenx Corporation: a great pipeline of nine drugs, finally getting recognition from US investors
It almost doesn’t seem possible that the Intelgenx of December 31, 2010 and the Intelgenx of June 30, 2011 could be the same company. In December of 2010, both IGX (on the TSXv) and IGXT (on the OTCbb in the US) were drifting on almost no volume around $0.30/share. In February, we bought another two million shares for another fund in two block trades, bringing our ownership in Intelgenx to over 10% of the company.
Since then, and especially since May 16, events have unfolded at a good clip, with volumes in IGXT in the US now routinely being in the hundreds of thousands of shares a day, and it is not that unusual to see volume surpass 1million shares in a day in the US.
The positive developments for Intelgenx started piling up shortly after January 31, with no fewer than nine important fundamental developments occurring between February 3 and June 22, 2011. I will highlight only a few of them:
1) On February 3, Intelgenx announced the dismissal of patent litigation relating to its “Once Daily High Dose” 450 mg Bupropion Hydrochloride tablet: the United States District Court of Delaware had finally dismissed the lawsuit against IntelGenx that was initiated by Biovail in August 2009. This litigation had been one of several roadblocks to the creation of shareholder value that cropped up during a period when Murphy’s Law seemed to rule Intelgenx’s existence.
2) It was the re-filing of their New Drug Application (NDA) for CPI-300 which really unleashed the interest of US investors: May 16 was the day they announced the refilling of this NDA, and 1.8million shares traded in the US on that day. (It appears there is a sub-set of smallcap US healthcare investors that use the filing of an NDA as a catalyst to get involved in a stock.)
3) On May 24, it was announced that Dr. Rajiv Khosla had agreed to join Intelgenx’s Board of Directors. The most salient points from the press release: “From September 2005 to December 2010, Dr. Khosla was Vice President of Business Development at Biovail Corporation. During his tenure at Biovail, Dr. Khosla successfully led the transaction process for over 75 deal opportunities in a variety of therapeutic areas, including the central nervous system, dermatology, women's health, cardiovascular and gastrointestinal, drug delivery, orphan drugs, generics and pipeline partnerships.” It is especially notable and relevant that Biovail’s “biggest” drug for years was Wellbutrin XL, and Intelgenx’s first New Drug Application (NDA) filing was for CPI-300, a 450mg dose of Wellbutrin. The synergies between Intelgenx and Dr. Khosla are screamingly obvious, in that light.
4) On June 3, the company announced a private placement of “up to approximately $3million”. It closed on June 22. Rodman Renshaw, one of the pre-eminent healthcare-focused boutique investment banks in the US, was responsible for placing the money that came from US investors. The significance of this is two-fold: i) for the first time (that I am aware of anyway), Intelgenx broadened its shareholder base to include sophisticated US healthcare/biotech funds, and ii) it is now likely we will see a research report on Intelgenx from one of Rodman’s biotech analysts. (Speaking to one Rodman employee shortly after the deal was announced, he suggested that he thought that EACH of the drugs in Intelgenx’s 9 drug pipeline could be worth the existing market cap with the stock at $0.70. i.e., he was suggesting Intelgenx was worth over $6/share! Sure would be nice to see that in writing in a research report…)
An important side note: $3million may seem like a woefully inadequate amount of money for a biotech company to be raising, but it’s worth reminding readers that because Intelgenx uses the 505b2 pathway to commercialize existing drugs on new drug delivery platforms, it does not require much money to progress its pipeline to commercialization. (Intelgenx’ motto is “We make approved drugs better.”) For example, Intelgenx’s pipeline includes i) an existing tablet-based migraine drug (that sells over $500million per year in the US alone) that Intelgenx will deliver on a sublingual strip, as well as ii) “Cialis-on-a-strip”.
5) Intelgenx generated positive bioequivalence data for two of its pipeline drugs in the February to April timeframe: bioequivalence is often the determining factor in the approval of drugs using the 505b2 pathway, so these announcements are very good indications that value is continuing to be created in Intelgenx’s pipeline.
The bottom-line here is that my target of realizing between $3/share and $8/share in value from Intelgenx over the next 3-5 years seems much more achievable in light of the series of very positive developments seen in the last 6 months.
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