Short Interest in BioDelivery Sciences Is Good News

A comment from a reader:

I am considering your pick of BioDelivery Sciences (BDSI) and have done my own Due Diligence. What in your opinion explains the 12.39% current short interest? Also, what are the potential sales projections to market?

VFC's Take: Quite simply - the short interest is there because the stock is being somewhat manipulated, in my opinion; a theory that holds more weight since Feuerstein got involved.

Also, I believe that shorts jumped on board when the FDA delayed the Onsolis decision earlier this year after deciding that the news could be perceived as negative.

In my opinion, the short interest is good news because it means that these guys will have to cover. If BDSI was a speculative stock without any future growth to look forward to, then that would be one thing; but the fact cannot be ignored that this company has an approved drug in a big market (cancer pain market is over $3 billion) and a pipeline for the future.

I'm buying BDSI at any price below five dollars and viewing it as a long term growth stock.

Tuesday's dip to $4.60 was buy time, in my opinion - and anything lower is a gift.

Also, here are some financial terms taken directly from a recent PR issued jointly by Meda and BioDelivery:

Under the terms of its commercialization agreement with Meda, BioDelivery Sciences will receive an aggregate of approximately $27 million in milestone payments. The first is based upon FDA approval of ONSOLIS which is in the amount of approximately $12 million. Meda had already advanced the company $3 million in January 2009 against the $15 million milestone payment. A second payment of $15 million will be received following the manufacture of launch stocks of ONSOLIS, a target the company has also achieved. In addition, BDSI will receive a double-digit royalty on net sales as well as the potential for up to another $30 million in milestone payments upon the achievement of certain sales thresholds.

Also of note, due to the recent milestone payments, BioDelivery is past the point of needing to raise money to fund its future pipeline.

Disclosure: VFC is long BDSI.

Comments

[jimmy Turano]

Terrific article! Now you may be the writer/expert to set things straight on 'MRNA'. My beef is simple. Since 2007, so many analysts,researchers, who follow this stock always release a buy signal and high target prices that are absolutely absurd. Since they follow the stock and have possibly obligations to put out positive
news, for whatever reasons, I find it totally misleading investors.
As you can confirm, the stock has gone from $20.00 to $.28 cents
during this time period. This year it has rebounded to $3.00 due to two new partnerships, but has settled back to around $1.42 the last two months. Recently, just 4 weeks ago, once again another analyst put a $4.00 target price. Now four weeks later the stock is around $1.35 cents. These people should be investigated period.
So now, what is your input on this matter, and the real future
prospect of this company?
Thank you in advance.
Jimmy T

2009 Sep 02 08:47 AM

[littlefrog]

Jimmy you are missing one important point, MRNA doesn't have a FDA approved drug, BDSI does. there is a future revenue inflow right there for BDSI.
But something does scare people away is the lack of clarity for BDSI's cost structure, i.e, how much profit will left after BDSI pays all expenses of drug manufacturing, and how well the drug will do in sales. the CFO was very vague about this in the CC.

I agree with VFC that this stock is a long term play, more news is coming in Q4 when Onsolis starts selling, and another Phase II result for their pipeline. If Meda does a good job promoting Onsolis and the forementioned cost issue becomes clear, we are up to a very happy Christmas...

2009 Sep 02 12:50 PM

[jimmy Turano]

little frog I love bdsi for past 3 years.
I am sure it will turn out good for shareholders because they do have a FDA approved drug and good pipeline. But it is night and day difference from 'MRNA'. There is way to much Hype on the stock, with no phase1,2,3,4 drugs and decelerating assets and no serious Revenue too.
I just need someone like VFC to spell it out and give some feedback on this company the way it really is!


On Sep 02 12:50 PM littlefrog wrote:

> Jimmy you are missing one important point, MRNA doesn't have a FDA
> approved drug, BDSI does. there is a future revenue inflow right
> there for BDSI.
> But something does scare people away is the lack of clarity for BDSI's
> cost structure, i.e, how much profit will left after BDSI pays all
> expenses of drug manufacturing, and how well the drug will do in
> sales. the CFO was very vague about this in the CC.
>
> I agree with VFC that this stock is a long term play, more news is
> coming in Q4 when Onsolis starts selling, and another Phase II result
> for their pipeline. If Meda does a good job promoting Onsolis and
> the forementioned cost issue becomes clear, we are up to a very happy
> Christmas...
>
>

2009 Sep 02 05:49 PM

[gunder]

I think BDSI is an excellent takeover candidate. With $30M+ cash and ZERO debt and an FDA approved first product that validates their patent protected BEMA technology and only 100M market cap they should see much interest. The next BEMA product can do 500M in rev's and the BEMA tech can be used on 13 other pain drugs. This is an absolute gift below $5.00. In my opnion we should be over $10 with the first approval behind them!

2009 Sep 08 03:23 PM

[wary]

WAKE UP !! bdsi is going nowhere

2009 Sep 14 10:53 AM

[baguaboy]

I agree totally that BDSI is seriously undervalued... the hot speculative money has exited BDSI now that approval has been obtained...this is why it has pulled back.This always happens with hot developmental biotech co's..there is then a lull before the herd revalue the co. as a long term, revenue generating enterprise and the long term growth potential is revealed as doctors start to (indeed are effectively forced to ..given best practice legality) prescribe the newly approved drug.Often a swift takeover occurs before this upwars revaluation occurs . We are at the cusp of this with BDSI...very cheap at anything below $5.. could motor to $8 in next 1/2 months.

2009 Sep 19 09:10 AM