Seeking Alpha
Healthcare, option plays, dividend investing, long only
Profile| Send Message|
( followers)  

Summary

  • OXiGENE reported Q2 earnings yesterday, missing analyst estimates.
  • In spite of this event, I reiterate my bull thesis on OXiGENE in light of the latest pipeline developments, which, in my opinion, counteract the negative earnings sentiment.
  • While I anticipated important updates regarding EU requirements and scheduling of the full readout for Zybrestat/Avastin, I didn't anticipate the earnings miss. The latest earnings report corroborates this position.

In March I wrote a bullish article on OXiGENE (NASDAQ:OXGN), stating the company was undervalued, but weak financials, poor historical stock performance and a suboptimal manufacturing capacity would impede the company's progression to the cancer market. I argued that these inefficiencies could prompt management to sell the company at a discount relative to what I believe to be the true value of OXiGENE's lead ovarian cancer synergy, Zybrestat/Avastin. After all, OXiGENE has disappointed investors time and time again on many fronts, namely by conducting frequent capital raises and, in turn, diminishing shareholder value. It seems that the Q2 earnings miss only corroborates that assertion, accompanied by the fact that CEO Chaplin's business strategy appears very much aligned with that of his predecessor, Dr. Peter Langecker. Consequently, it's no surprise that the stock is in turmoil. In observance of this volatility, I amend my bull thesis to "somewhat bullish" in the wake of OXiGENE's important clinical updates, as well as its strong financial position which should provide enough runway to sustain R&D through 2015.

As reported by Seeking Alpha some key highlights of OXiGENE's earnings miss are as follows:

  • Loss Per Share increased to $0.23, missing analyst estimates by $0.10.
  • Cash position increased 418.6% to $36.3 million as compared to $7 million for Q2 2013, following the $16 million direct offering conducted in late May.
  • Net loss increased 137.5% to $3.9 million as compared to $1.7 million for Q2 2013.
  • OXiGENE generates $0 in revenue, with no regulatory approved, marketed product.

When I evaluate OXiGENE, I find myself repeatedly returning to the grim findings above: both the sustained Loss Per Share and management's egregious capital raises, as well as an ever increasing cash burn. Thus, being a shareholder myself, I have lost a lot of patience in the hopes that OXiGENE will reverse this sustained pattern of poor performance. But, with my misfortune comes a rather speculative opportunity to accumulate shares at considerably low prices. Dr. Chaplin noted that the full readout for the Phase 2 trial of Zybrestat/Avastin is scheduled for the upcoming International Gynecologic Cancer Society conference in Melbourne this November. Last March, OXiGENE announced positive topline data from this study, catapulting shares as high as 150%. I believe this demonstrates OXiGENE's market potential should the full readout yield similar findings. Dr. Chaplin stated that such findings--namely, any significant increase in Overall Survival (OS)--are pivotal to a potential partnership. Another important development is the EU status of Zybrestat for anaplastic thyroid cancer, which still could be granted exceptional circumstances pathway. Further drug manufacturing to support development and possible late stage studies of the compound also took place during Q2. In consideration of the latest earnings event, as well as the status of the key clinical programs above, I amend my bull thesis to "somewhat bullish" because we still don't have tangible results, but rather, an abundance of empty promises about the better days ahead.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

Source: Update: OXiGENE Earnings - Q2 Miss Challenges My Patience