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Natty Greene
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Natty Greene is an avid investor who is always on the hunt for undiscovered small cap gems benefitting from secular growth trends with an eye toward those stocks with increased insider or institutional ownership and potential acquisition targets.
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  • Did Synergy CEO Just Telegraph Phase 3 Success For Plecanatide?

    Did Synergy CEO Just Telegraph Phase 3 Success for Plecanatide?

    In the small cap, biotech world of binary outcome events, it is very rare that a CEO tips his hand in investor presentations about the success or failure of an imminent Phase 3 readout before those results are released in a customary, official press release.

    For those market participants who took the time to listen to Synergy CEO Gary Jacob s presentation at the UBS Global Healthcare Conference last week, you heard a CEO with as much giddiness as I have ever heard from a CEO on the eve of his forecasted, imminent release of Phase 3 results.

    These are the comments from CEO Gary Jacob on May 20, 2015:

    -"This is a terribly exciting time for Synergy."

    -"We are very close to releasing top line data on two registration trials."

    -"High confidence around Plecanatide"

    -"Really a transformative time for Synergy"

    -"A company that has taken our drug from discovery all the way through to cusp of NDA filing"

    -"We think we have a terrific asset"

    Apparently, Canaccord Analyst Corey Davis heard exactly what I heard at UBS on May 20 because just two days later, he issued a Buy rating and a price target of $11.00 for Synergy (or 150% upside from current price of $4.40). As Davis put it in his note to investors, "We have never been shy about taking swings in front of binary outcomes, and this one qualifies as one of the biggest we've seen in a while." He continues that he thinks the Phase 3 trial has a "high likelihood of success" and if successful "an attractive takeout candidate since it owns full worldwide rights on plecanatide."

    And just a few days before Davis' note, Cantor Fitzgerald Analyst Irina Koffler issued a similar note on May 12 pointing to the possibility that Synergy will be acquired in saying, "we continue to view Synergy as a potential takeout candidate. Once Synergy releases its Phase III constipation data in ~June/July, we think the company will be at a more urgent inflection point, where management may need to engage potential partners or assess go-it-alone commercial scenarios." Koffler has a "Buy" rating on the SGYP stock with an $8.50 price target (or 93% upside from current price of $4.40).

    This recent analyst action echoes what was first reported by Bloomberg s Makiko Kitamura and Manuel Baigorri on March 26 when they said Synergy was "talking to advisers about a potential sale of the company." They continued that, "a sale of the New York-based company is likely to hinge on the results of a late-stage trial of the drug, which may be announced in May."

    Well, we are two days past Bloomberg's forecast of a May announcement of Phase 3 results. And we have 20 market days left until the end of Q2 2015, which is the timeframe that Synergy CEO guided for in releasing Phase 3 results.

    Based on the UBS presentation on May 20, the recent analyst comments, and the media reports of the potential sale of the company if Phase 3 results are successful, this is a very interesting time to speculate on what is going to happen today or in the next 20 market days for Synergy Pharma.

    Out of all of the chatter cited above, I would put the most weight in what we heard directly from the CEO last week at UBS. The Phase 3 trial he said they were "very close" to releasing results from completed enrollment on January 8, 2015. Therefore the twelve week trial would have concluded in early April 2015. His UBS comments were nearly 60 days post the completion of the trial when he said, "this is a terribly exciting time for Synergy," and that he has "high confidence around Plecenatide."

    Consistent with the extraordinary bullishness expressed by the CEO on May 20, I expect Synergy to release market moving results from their pivotal Phase 3 Plecanatide trial (3mg) in patients with chronic idiopathic constipation at any time now and no later than June 30. With this many clues to the likely bright future of Synergy, this may be an ideal time to consider a speculative position in Synergy with a clearly forecasted short term catalyst.

    Tags: SGYP
    Jun 02 11:29 AM | Link | 2 Comments
  • Mast (MSTX) Is Buyout Target For Big Pharma

    Mast (NYSEMKT:MSTX) is a Likely Acquisition Target for Big Pharma

    There is a great need for new, medical advancement in the treatment of sickle cell disease.

    According to MAST CEO Culley, "Many people are unaware that MST-188 is the most clinically-advanced new drug in development for SCD. But as such, we have the honor of leading a growing and important field, which unfortunately has historically suffered from too little awareness or investment. Remarkably, there has been only one FDA-approved drug for SCD and that approval came a whopping 16 years ago. Surely, patients deserve better."

    Big Pharma has shown their propensity to acquire and or partner with small companies developing orphan status drugs for rare diseases like sickle cell disease.

    One example is Pfizer's $340 million pact with GlycoMimetics to develop GMI-1070.

    Another is Baxter's (NYSE:BAX) recent acquisition of AesRx, LLC, a private U.S. biopharmaceutical company focused on orphan drug targets, including the development and commercialization of Aes-103, an investigational prophylactic treatment for sickle cell disease.

    Interestingly, both of these cases involved big pharma partnering or acquiring a smaller company while these sickle cell drug candidates were in Phase 2.

    In contrast, Mast is currently in Phase 3 for MST-188 in sickle cell disease and in Phase 2 for MST-188 in occlusive arterial disease. Additionally, Mast's MST-188 for sickle cell disease has already achieved orphan drug status for SCD in both the U.S. and EU, as well as fast track status with the FDA making it a very attractive candidate for acquisition.

    Based on recent partnership and acquisition activity by big pharma in the specialty, rare disease area of biotech, Mast Therapeutics is becoming an attractive candidate with a promising new drug undergoing mid and late stage trials in multiple indications.

    Investors have a limited window of opportunity to invest in this exciting, small company early before the full value is realized by premium buyout or share price appreciation as investors pour into the stock prior to Phase 3 readout in the coming months.

    Just last week, Roth initiated coverage of MSTX at "BUY" with a $3.00 price target. Canaccord also has a "BUY" rating and $3.00 price target on MSTX.

    And institutions are building huge positions in the stock too with over 20 million shares added to institutional positions versus only 230,957 shares sold. Top institutional owners of MSTX include Franklin, Baker Brothers, Sabby, Vanguard, BVF, and Alyeska.

    With $57 million of cash and equivalents on hand (as of 12/31/14) and existing U.S. and EU orphan drug designation for another indication (sickle cell disease) of MST-188 currently in Phase 3 trial, the risk of ownership and significant loss at this small market cap of $82 million is very low in my opinion.

    The risk/reward equation points very favorably to reward with possible weakness/downside risk at year-to-date closing lows of $0.43 and possible upside rewards at the most recent analyst price target of $3.00.

    Tags: MSTX
    Apr 30 10:18 AM | Link | 1 Comment
  • Buyout Of Zogenix Likely Based On Garner's Track Record

    Buyout of Zogenix Likely Based on Garner's Track Record

    Based on the track record of Zogenix founder and chairman, Cam Garner, a premium buyout of Zogenix may be on the near term horizon. With tomorrow's FDA PDUFA date on the abuse deterrent formulation of FDA-approved Zohydro ER, Zogenix becomes even more valuable for a potential buyer. After all, Cam Garner has designed and built Zogenix just like he has designed and built other companies he has sold at premium prices in recent years.

    Cam Garner Business Model Designed for Premium Buyout

    A big key to Zogenix's early success is its founder, Cam Garner. Garner is one of the best in the business at creating and growing specialty pharmaceutical companies into attractive acquisition targets for bigger pharma. His track record of success is legendary as illustrated by taking his profitable business model to tiny Dura Pharmaceuticals (valued at $5 million when Garner took the helm) and executing a strategy that resulted in Dura being acquired a decade later by Irish drugmaker Elan Corp. (NYSE:ELN) in a stock deal worth $1.8 billion.

    That Dura business model has been replicated in multiple Garner creations in the years since his 2000 Dura transformation resulting in similar outcomes - premium takeovers greatly benefiting early investors. Examples include Cam Garner-founded companies DJ Pharma (sold to Biovail Corp. for $212M), and Xcel Pharmaceuticals (sold to Valeant Pharmaceutical for $282M).

    To make my point and ZGNX buyout forecast even more credible, one only has to look at Garner's latest exit and premium buyout deal. Cam Garner recently sold Cadence, another San Diego based company he founded and chaired the board (just like Zogenix) for $1.3 billion to Dublin-based Mallinckrodt. At the time of the sale, Cadence had annual revenue of $110 million. Seeing the opportunity for major revenue growth going forward, Mallinckrodt purchased Cadence at nearly 12X their 2013 annual revenues.

    The Cam Garner business model is very visible for all to see. I believe that Zogenix is for sale at the right price based on his track record. With tomorrow's likely FDA approval of Zohydro ER (AD), buyout interest should intensify and Cam Garner and company may be very close to exiting at a premium valuation to annual sales once again.

    Tags: ZGNX
    Jan 29 1:35 PM | Link | 9 Comments
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