Seeking Alpha

Natty Greene's  Instablog

Natty Greene
Send Message
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.
View Natty Greene's Instablogs on:
  • 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
  • Zogenix Victorious As Massachusetts Caves On Emergency Zohydro Restrictions

    Zogenix Victorious As Massachusetts Caves on Emergency Zohydro Restrictions

    A few weeks ago, I published an article, Imminent District Court Ruling Should Propel Zogenix Shares Higher, with an update on Zogenix's (NASDAQ:ZGNX) challenge of the restrictions put on Zohydro by the state of Massachusetts. As expected, the share price has risen near 30% ($1.80 to $2.31) in anticipation of a favorable ruling for Zogenix by Judge Zobel in the Massachusetts District Court.

    The key challenges made by Zogenix involved two, emergency regulations (forced failure requirement and the pharmacist-only handling of Zohydro). If Zogenix could get the court to stop these two restrictions, I made the case that it would be bullish for the stock as the uncertainty would be lifted.

    Regarding the forced failure requirement, the emergency restrictions on Zohydro required the when prescribing Zohydro in Massachusetts, the doctor must include a Letter of Medical Necessity that other treatments "have failed." By requiring a change in the FDA-approved indication for Zohydro to include a forced failure mandate, Governor Patrick's actions were likely to be preempted by federal law.

    Regarding the ban on anyone handling Zohydro except licensed pharmacists, the emergency restrictions on Zohydro would have allowed only licensed pharmacists to handle Zohydro in the pharmacies in Massachusetts. Zogenix objected to this onerous restriction too in court.

    Onlookers who read my June 20th article when these issues were discussed may have wondered why Judge Zobel has not ruled on these restrictions yet. For one, she has been very busy with other cases, but what we have discovered by the July 3rd filing by the state of Massachusetts is that she may not have to rule because Massachusetts has basically caved on both restrictions challenged by Zogenix. This is a clear victory for Zogenix and the sale of Zohydro in Massachusetts going forward.

    In the July 3rd filing (via, Massachusetts Attorney General Marsha Coakley does a complete reversal on the forced failure requirement and voluntarily changes the language of "have failed" to more closely match the FDA indication language of "are inadequate." It must have become very clear to Massachusetts that their restrictions would have been preempted.

    Additionally, the Massachusetts Attorney General also caved on the licensed pharmacy handling of Zohydro. In another win for Zogenix, the state of Massachusetts has softened its position and now added to its rules that pharmacist interns may also handle Zohydro.

    Both of these complete reversals by Massachusetts in the face of likely preemption rulings are bullish for Zogenix. Now that this uncertainty is diminished, Zogenix shares are likely to continue their climb from the severe dip caused by these aggressive actions by Massachusetts.

    Disclosure: The author is long ZGNX.

    Tags: ZGNX
    Jul 07 9:39 AM | Link | 7 Comments
Full index of posts »
Latest Followers


More »

Latest Comments

Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.