Introduction
Let me introduce you to a little-known company that I believe will soon become known as the "Salesforce.com of the biotech world." Only this company doesn't trade 100x earnings. In fact, it trades below the net cash on its balance sheet. The name of this pioneer in the health care industry is CollabRx (CLRX). As most investors know, companies focused on the "cloud" and "big data" have been red-hot, witnessing parabolic, breathtaking runs.. witness Salesforce.com (CRM), Rackspace (RAX), and Equinix (EQIX), to name a few. The health care sector has also been on a monumental run, with speculative biotechs such as Sarepta (SRPT) yielding mind-blowing returns. Imagine having the opportunity to get in on the ground floor of a company offering cloud-based solutions to leaders, practitioners, and patients in the heath care industry--the best of both worlds from an investment perspective--this is precisely where CollabRx comes in.
Overview
CollabRx offers a cloud-based expert network that provides valuable clinical knowledge to institutions, physicians, researchers and patients for genomics-based medicine in cancer and other diseases to inform health care decision-making. With access to approximately 50 clinical and scientific advisors at leading academic institutions and a suite of tools and processes that combine artificial intelligence-based analytics with proprietary interpretive content, the company is ideally positioned to participate in the $300 billion "big data" opportunity in the U.S. health care market (as reported by McKinsey & Co), over half of which specifically targets areas in cancer and cancer genomics. Essentially, CollabRx runs an instantaneously accessible central database that compiles the cumulative wisdom of the brightest and most experienced practitioners and researchers from around the world. Although its plans are far more ambitious, CollabRx needs to capture only a tiny fraction of this $300 billion market to trade many multiples higher than its closing price of $4.14.
Partnerships
CollabRx's recently announced collaboration with Life Technologies (LIFE), an $8 billion company and leader in the life sciences, is a game changer. Perhaps even more important than the revenue stream generated, inking a deal with a behemoth like Life Technologies gives CollabRx an invaluable seal of approval for their platform from a leader in the industry. This validation will surely lead to other big players following suit and joining forces with CollabRx.
Here is what Ronnie Andrews, president of Medical Sciences at Life Technologies, said about the partnership:
CollabRx has pioneered the development of a scalable platform and process to provide actionable, accessible, and credible knowledge at the point of care to aid physicians in developing a cancer treatment plan based on tumor molecular profiles. We are excited to include this key capability with our molecular diagnostic tests.
The list of advisors to CollabRx includes the most prestigious academic and medical institutions in the world, including: Brigham And Women's Hospital, Dana-Farber Cancer Institute, Harvard Medical School Massachusetts General Hospital, and Stanford University, to name only a few.
George D. Lundberg, MD, is Editor-In-Chief & Chair of the Editorial Advisory Board of the Company. He has been proclaimed the "medical Internet pioneer" and dubbed "Online Healthcare's Medicine Man" by the Industry Standard. Lundberg holds a total of 7 earned and honorary degrees.
Takeover Prospects
CollabRx is one of a select few companies in not just the biotech sector, but the entire stock market, that currently trades for less than net cash value, so any potential acquirer would effectively be getting the business for free. Additionally, several small companies in this sector have been takeover bait in recent weeks. One such target was Complete Genomics (GNOM), which was valued at 8x CollabRx's current share price. Life Technologies also recently purchased privately-held bioinformatics company Compendia Bioscience. It would not surprise me to see Life Technologies step in and buy CollabRx outright, and consummate the relationship they have already established. For these reasons, CollabRx must be considered a prime takeover candidate.
Conclusion
As with any small-cap stock in the biotech sector, CollabRx is a speculative investment, as it is in the early stages of a rapidly growing segment of healthcare. The possibility always exists that CollabRx gets crowded out by a larger player in the space. However, considering how massive the "biocloud' is, and the foothold that CollabRx currently has in it, I firmly contend that additional collaborations, and/or a takeover are much more probable scenarios.
I believe CollabRx has tremendous potential as an early-stage "biocloud" analogue to Salesforce.com. CLRX surged 100% immediately following the deal with Life Technologies. A combination of fast money sellers, a weak stock market, and an Alcatel Lucent overhang (that has since been eliminated), has resulted in CLRX retracing most of that move in recent days, and gives those interested a second (and perhaps last) chance to get in on the cheap before the rest of Wall Street fully appreciates the exponential growth prospects of CollabRx.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
