What Gives With Avant Immunotherapeutics?

Things in the biotech world continue to get more and more curious.

How about a company cutting a major development deal and getting cash twice its market cap, and the stock doesn't moving?

The professional money managers I speak with who focus on this area believe we are at a bottom in pricing for the little guys -- the microcaps and small-cap biotechs that capture the imagination and hope of many investors. That being said, they also think they are not moving with news and positive catalysts as they have in the past.

A great example is Avant Immunotherapeutics (AVAN). I do not follow the company closely in my ChangeWave Biotech Investor service, but I do keep a close eye on other immunotherapy companies, namely Dendreon (DNDN) and Cell Genesys (CEGE), which I have written about here.

Last week, AVAN cut a deal with Pfizer (PFE) that seemed like a great one:

• PFE will pay $40 million up front and invest another $10 million in return for the worldwide license to a brain-cancer vaccine candidate.

• AVAN can earn another $390 million and double-digit royalties if its drug, CDX-110, (and related treatments) eventually gets through the regulatory process and makes it to market. The drug is currently in mid-stage or Phase II trials.

• A big upside for the company is PFE's statement saying that they want to develop CDX-110 for other cancers, such as ovarian, prostate, breast and colorectal. The deal gives PFE an exclusive for these other indications.

The stock roared with approval of this news and then blew up -- from $10 and change to north of $14 and back to $10 where it is now.

I am not an advocate of AVAN -- I know too little about the company right now -- but, come on! The stock doesn't move?

Antigenics (AGEN) moved when it said it got approval for its immunotherapy in Russia (is Putin not feeling well?), although it has come back down.

Cell Genesys did not initially move much after it cut a deal a few weeks ago with Takeda, but is now up more than 50%.

Dendreon, the traders' great hope, has a much higher valuation, even though it has not been able to secure a partner and has a management team that, well, the aforementioned Putin could like based on their sensitivity to the common shareholder.

Am I recommending AVAN? No. But I wanted to bring this to your attention: It is a pretty good deal when you get an upfront payment twice your market cap -- and the market cap does not move. Is this a rejection of PFE -- the company with one blown trial and sales effort after anther -- or simply investors shunning Phase II companies?

Think about it.

Comments

[wonder121:]

Your basing the market cap at less than fifteen million. This is incorrect , based on the current number of shares outstanding. Yahoo has been showing a number which is probably calculated on information prior to the reverse split. Marketwatch has the correct market cap shown as about 160 million. Based on this, the 40 million upfront payment is approximately one-quarter of the market cap which should has sustained a gain of near the 25 percent move up in the stock that took place before the pullback.

2008 Apr 23 04:52 AM

[biofest:]

Take a look at Curogen. Deal worth $39 million. Market value $55 million Net cash after deal $72 million.

2008 Apr 23 06:13 AM

[ed2:]

The recent merger gives people a chance to cash out or causes them to cash out. Any up tick out they go.

2008 May 13 11:30 AM