Shares of Antigenics (AGEN) dropped to nearly two dollars during pre-market trading on Friday after news hit the wires that the company had sold five million shares at $2 per in a private placement fund-raising event.
VFC's Take: Private placements are a part of speculative investing and nothing has changed with the potential of the company, so no one should be panicking if shares of AGEN trade for two bucks again. I emphasize, nothing has changed with the potential of the company. Oncophage still has proven to work and it looks like the commercial launch of the product in Russia is close, hence the need to raise the cash, and QS-21 is still loaded with potential. There's nothing to worry about if you invested in AGEN for the long term.
If you're a day / swing / momentum trader that was looking for a quick fix and looking to get out short term for near three dollars, then you might be a little upset.
Also keep in mind that had this placement taken place a couple of weeks ago, it could have been for a $1 dollar price, since shares at that time were trading for about $1.50.
Long term investors should be ecstatic, in my opinion, to have another opportunity to get in for $2. I'm averaged in for well below a dollar, but I've been going against standard investor principle by averaging up in AGEN because of the potential of the company. Two dollars is my buy price and I'll be adding if it remains trading near that price.
Don't let the naysayers tell you that the sky is falling - it's not. In fact, I'm more confident now that the Russian launch for Oncophage is close.
Long termers - take advantage of this dip.
Addressing Reader Comments/ Questions:
Question: [regarding the AGEN stock] in the conference call yesterday, it was disclosed that they had $21 million in cash flow.
"We had $21 million in cash, cash equivalents, and short-term investments at the end of the second quarter. We believe our current cash balances are sufficient to fund our operations into 2010"
Why the need for the private placement if this is the case?
thanks again for your analysis and site...its one of the very few investment sites i read daily!
VFC's Take: According to the company, the money raised by the private placement will be used to "fund commercial and regulatory efforts, including sales of its cancer drug Oncophage in Russia, Europe and elsewhere."
I don't believe that this private placement is too much of a significant event, as I stated early on Friday, and we can only speculate as to why the money was needed.
First of all, nothing has changed with the potential of this company and its product pipeline. AGEN is one of the few stocks that I am actually willing to average up in, as I add every time it drops to around $2. I'm still averaged in for under a buck.
As for why the private placement? Here's the most popular ideas bouncing around inside VFC's head regarding the placement:
- The Russia launch of Oncophage is very close and the company needed to beef up the bottom line in order to ensure that demand could be met.
- European approval is closer than we think and the company needed to beef up the bottom line to prepare for a possible European launch later this year.
- The board of Antigenics is somehow involved with the recipients of the placement shares and they just got a hook up. If this was the case, it's only illegal if it's blatant and you get caught. I'm sure stuff like this goes on all the time.
- The board went overboard with expenditures during their celebratory fiesta at the newly opened 'Scores' club in New York City. A joke, yes, but my point is maybe they blew through some unexpected money and we won't hear about it until the next CC.
I think that things are moving very quickly for Antigenics right now and that the raised cash will be used to grow the potential of the company. Dendreon's (DNDN) Provenge is the wild card that can boost the value of all cancer immunotherapy companies and their respective stocks.
Finally it all looks like the perfect storm for success is forming in regards to cancer immunotherapy and the board of Antigenics' wanted to be fully prepared and funded for whatever is about to take place.
Rather than getting scared out of your shares, long term investors should have added on Friday at near two dollars.
Just my opinion.
Disclosure: VFC is long AGEN.