Replies to post #169741 on Biotech Values

[DewDiligence]

Re: Buying a biotech solely for its cash

If things fail, they don't shut-up shop and return the money to shareholders. Instead they spend the remaining cash either on some new project or, more likely, on further attempts to make the old project work.

Usually, but not always; there are exceptions where buying shares of a busted biotech company solely for its cash balance can be profitable. I made money buying two such companies: Genomica (acquired by EXEL), and Variagenics (acquired by Hyseq and renamed Nuvelo). In both instances, the acquiring companies swapped their shares at an exchange rate that ascribed no value to the acquired companies’ non-cash assets; i.e., from the acquiring companies’ perspective, these deals were essentially financing transactions.

Despite my having two successes with the above approach, I would readily admit that buying shares of a quasi-shell biotech company is a tough way to make money. Even if the BoD is not corrupt and is genuinely trying to maximize shareholder value, you may have to wait a long time for them to acknowledge that the business has no potential and entertain the notion of selling or liquidating. Moreover, when these kinds of companies are acquired, the deals are almost always for stock because a cash deal makes it too obvious that the selling company’s non-cash assets aren’t worth anything; hence, you run the risk that the stock of the acquiring company will decline precipitously following the deal closing.

Once in a blue moon, a busted biotech company actually does shut down and return the remaining cash to shareholders. This happened with a company called CABG Medical (#msg-9639760).

[nuere]

Sounds a lot like ACAD..
CNDO will show that TSO works in some autoimmune disease but it will take some time.

[DewDiligence]

NVDL joins the small list of biotech companies who have liquidated and distributed their remaining cash (such as it is) to shareholders:

http://finance.yahoo.com/news/novadel-announces-proposed-actions-complete-124900726.html

The last biotech company I remember doing this was CABG Medical in 2006 (#msg-9639760).