Here's someone's interesting thoughts:
To achieve a biotech partnership, there are multiple areas that need to be considered by TM and his executive team. It takes a lot to get someone else interested enough to buy you or at least buy a construct. Contrary to popular belief, $100M is not a small amount to the large pharmas. Go ask an Apple executive what it takes to spend $100M in that company.....
To consider purchasing another bio, a pharma will look at many things. To consider partnering on a construct, a pharma will look at very different things than what they would for an outright purchase. Partnering on a construct will make a pharma look at the construct itself, the construct's market potential, the construct's performance through its trials, the pharma's competition in this specific market place etc.. Its a value proposition. For a purchase, the pharma must consider ALL assets, which increases the value of a robust pipeline, corporate debt & cash levels, multiple program costs added to their existing business etc..
Examining a pharma purchasing ADXS:
As we all discussed before, it is a matter of value and how ADXS could improve the bottom line for the purchasing company. If the bottom line could be improved by an acceptable percentage with in a reasonable amount of time, than it will be a reasonable deal. Remember, to by the rights to something that still needs to go through a PIII means not only paying a lot to the seller, but also commiting an additional amount of capital to get through the PIII and FDA approval as well as the normal business ramp up (marketing, sales, manufacture, distribution etc.). A $1B milestone deal probably costs $2B before a pharma starts to see returns on its investment. What would cause them to take this risk?
1) Being in a new and exciting field in the biotech industry wouldn't hurt. Immunotherapy is one of these fields. However, it is a difficult choice as to what company you may chose to partner with. If you read the preliminary results of most immunotherapy bios for their PII and PIII trials, they are all showing large promise for the most part. Most are showing reasonable safety profiles similar to ADXS. So what will set these companies apart?
2) Level of Trial: The level of trial makes a significant difference. Typically, pharmas will have to pay a lot more to purchase something that has been through a successful PIII over a PII.
The following are Immunos that are currently in PIII trials along with their associated market caps as of this Friday's close:
CLDX - $475M
ONCY - $357M
VICL - $298M
NLNK - $226M
ONTY - $111M
NWBO - $81M
CVM - $75M
PVCT - $68M
ONCS - $20M
The following are the immunos that have their best construct only in a PII trial so far along with their market caps:
IMUC - $130M
AGEN - $115M
INO - $108M
ADXS - $51M
Well, the PII club does seem to consistently offer around a $100M market cap which indicates some potential advantages to a pharma looking for lower cost without concern for increased risk.
3) Construct Safety: As mentioned above most of the immunos are showing incredible safety profiles. This does not much to help seperate these different companies.
4) Pipeline: Well this could be a good opportunity for assessing value because a lot of these immunos are pretty much setup as a "one hit" wonder and have taken the road of putting all their resources behind getting one construct over the PIII finish line instead of building a robust pipeline. A large pipeline reduces risks while a smaller pipeline increases the purchase risk.
5) Specific Market Impact: A large pharma will look to purchase a bio for two reasons; there is currently a hole in the pharma's pipeline or they need to reduce drug costs in an existing market due to competitive pressures. Currently, few pharmas are actually into immunotherapy so most will have a "hole" in their pipeline. They may offer products for the same disease that are not immuno, but they would still be interested in an immuno solution given the safety profile as well as opportunity to strengthen their existing markets. SO the specific disease target or ability to cover a wide range of disease adds value.
6) Direct Costs: Some immunos have a more expensive manufacturing process that cause a very large price to the consumer (DNDN). Others have a very small manufacturing price (ADXS). This is important for the pharma in reducing overhead to improve the purchase ROI down the road.
7) Product Portability: The ability to store product and ship it world-wide without hassel is something else that could improve ROI of a purchase. Some of the immuno products are more sensitive and don't lend well to being portable or will cost more because of legal transport requirements across borders.
8) Product Opportunity for Success: Several immunos have well respected research partners. Some conduct more than one PII for a construct which lends to credibility and reduces risk to a pharma.
Looking specifically at ADXS:
1) ADXS is in the new and exciting field of Immunotherapy (Low Risk)
2) ADXS is one of the cheaper market cap companies in immunotherapy (Low Risk)
3) ADXS has demonstrated great vaccine safety (Low Risk)
4) ADXS has a large pipeline (Low Risk)
5) ADXS is into multipl large markets: HPV cancers; Breast & Prostate; Vetrinary (Low Risk)
6) ADXS has low manufacturing costs (Low Risk)
7) ADXS has an easily portable and stored product (Low Risk)
8) ADXS has respected research partners and multiple on-going trials (Low Risk)
This means ADXS looks good for a pharma to directly purchase all of ADXS. The question is, will TM stand in the way of this? Maybe TM has been standing in the way of this all along and this is why ADXS has seemed to drag over the last 4 years compared to others such as IMUC. We'll know shortly.
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