Talon Therapeutics' (OTC:TLON) Marqibo was under the scrutiny of an FDA advisory panel this week (March 21st). Talon's stock price had been on a wild ride as it appeared on Monday that the odds of such a recommendation were a bit of a long shot. Its trial design wasn't ideal and it had marginal effectiveness. Noted biotech columnist Adam Feuerstein was very bearish on Marqibo's chances of approval and it sent the stock down over 20% Monday. His blog of the meeting was full of ups and downs and no doubt was toying with investor emotions. It appeared that many of those on the panel were actually quite positive about the help it delivered dying patients. The price shot back up on speculation that it would be recommended during the live blog.
My emotions were no different than any other Talon investor. I had a vested interest in the outcome of this meeting. As I have covered in many of my articles, I am a Tekmira (TKMR) investor. One of the best things about this company is that it benefits from others taking risk, including Talon. Marqibo is one of the many drugs being fueled by Tekmira's technology. If Marquibo is approved, Tekmira is entitled to a $10,000,000 milestone payment. For a company with only a $30 million market cap, it goes without saying that this is a large amount of money. I believe this milestone potential was mainly written off by Tekmira's investors because Marqibo's results didn't look that impressive. Most Tekmira investors are more focused on its technology being used in Alnylam's pipeline as they are a much larger company.
The panel ended up recommending Marqibo 7-4. The reasoning was that even if the drug worked a little, it could buy the extra time needed for a life saving transplant. Talon's price reacted accordingly, up about 20% at the time of this writing, and it will probably go higher. Confusingly, but not exactly shockingly, Tekmira's price has declined since the announcement.
If there is one thing I have learned from my time covering Tekmira, is that investors are slow to react to good news. This is unquestionably good news no matter how you slice it. Marqibo has not been approved yet, but this FDA panel recommendation is substantial. Prior to the Marqubo news, a fair value for TMKR was in the range of $2.40. Tekmira raised capital which diluted shares to $2.40 and then announced a new phase I clinical trial which added some mild value. This range has more or less been where the stock has traded since the share dilution.
The question that everybody should be asking is what does this news of Marquibo bring the fair value of the stock? I think in the ballpark of $2.75 is a fair value. It would increase Tekmira's market cap by around 5 million reflecting the fact that it has gained panel recommendation, but not yet been approved. I wont sell my shares below that, and I think investors would be insane to sell below $2.70 at this point. Judging by 2x average volume seen today, people do recognize the benefit of Marqibo's recommendation, but people are still willing to sell for some reason. I honestly believe that those selling have not connected the Talon dots back to Tekmira yet.
I put my money where my mouth is and bought even more TKMR at various prices below $2.40.
Disclosure: I am long TKMR, OTC:TLON.