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Christopher Wallace
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  • What Tekmira Investors Are Missing 12 comments
    Aug 20, 2014 12:54 AM | about stocks: ABUS

    Tekmira is the Vancouver-based drug company who has seen its stock price soar this month due to the outbreak of Ebola in West Africa. Tekmira is developing a drug to treat Ebola utilizing its RNA interference methodology. Long investors in the stock have doubled the value of their shares since the outbreak became front page news, less than a month ago. They have over-estimated what effect the outbreak will have on Tekmira.

    What has changed is that new attention has been focused on drug manufacturers who are attempting to develop a cure for the disease. There presently is no FDA approved drug that has proven efficacy in treating Ebola.

    What has NOT changed is that it takes time and money to develop and receive approval for a commercially viable drug. Three phases of trials on humans is the standard protocol, a process that takes years and would cost ordinarily in excess of $100 million. The recent outbreak may allow some drug to be used before completing that process for humanitarian reasons. Ebola is a deadly disease.

    The problem for the bulls right now is they think that somehow if the outbreak spreads or worsens, that will be good for TKMR. Simply wrong. The outbreak has put additional attention on its experimental drug. It may even sell a few vials, if it has any inventory on hand. But the outbreak is not going to accelerate their approval process to overnight. Large commercial sales of the drug will not happen until it gets its approval in the ordinary course. The longs somehow see a 1 to 1 correlation between new patients in West Africa and money for TKMR. That just is not the case. We all of course hope their drug works, or someone's drug works. But that can only be determined over time, perhaps less time as a result of the outbreak, but we are still talking years, certainly not weeks.

    The other aspect to note is that the outbreak does not increase the market size for the drug. The outbreak will surely have been contained by the time any of the experimental drugs currently in use receive their approvals. Once approved, governments and health organizations will buy and stockpile some drug. But that amount is based upon their constituent population, not the size of the West Africa outbreak. The amount they will buy is unlikely to be materially larger than if the outbreak had not occurred. Like flu vaccine, it is bought and stored in quantities based upon the statistical probability of it being needed.

    Tekmira could become a much more valuable company if and when its Ebola drug is eventually approved. It is the approval that will add value to the investment. The outbreak will neither increase nor diminish its chances for approval. Only time and trials will impact that outcome. Tekmira's likelihood for success has not increased as a result of this outbreak, nor will those chances diminish if it is brought under control. As the outbreak is eventually brought under control, this reality will be realized by retail investors, who will then appreciate that little has changed with the development of this drug as a result of the outbreak.

    The rush to get in the stock has become a frenzy, with price and average trading volume soaring in the month of August. You would think the outbreak occurred in August, wouldn't you? It actually first occurred in Ghana in December 2013 and by March of 2014 the World Health Organization had acknowleged that an outbreak had occurred in Ghana. By mid-April, cases had shown up in Liberia, Sierra Leone and Mali. And on July 26, the WHO reported the disease had spread to Nigeria. What happened with the outbreak in early August is unclear to me as to why the stock would take off at that point. Possibly that it occupied more of the headlines. But if the existence of an outbreak truly does impact the fortunes of a drug stock, the stock should have been moving at the beginning of the year, not the beginning of this month.

    Tekmira recently reported quarterly results which were below market expectations, and those results do impact the stock in a very real way.

    I am short the name via puts, as I expect investors to realize that an outbreak does not affect the development of a drug to treat the outbreak. I expect most of the gains due to the Ebola frenzy will be given back.

    Disclosure: The author is short TKMR.

    Stocks: ABUS
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Comments (12)
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  • XavierD
    , contributor
    Comments (14) | Send Message
     
    What you are missing is the rest of Tekmira's pipeline which has indications in markets estimated in the billions. Not to mention their unique technology and their partnerships.

     

    You talk about "quarterly results which were below market expectations, and those results do impact the stock in a very real way." Are you sure you're qualified to comment on biotech?
    20 Aug 2014, 06:57 AM Reply Like
  • john812
    , contributor
    Comments (43) | Send Message
     
    Can you expect someone who is short to say anything good?
    20 Aug 2014, 08:09 AM Reply Like
  • FishDawg
    , contributor
    Comments (4) | Send Message
     
    Oh dear. Longs were in TKMR for HGV and the RNAi platform, not just for Ebola. It's shorts who are overly-focused on the Ebola outbreak... do some DD please.
    20 Aug 2014, 09:40 AM Reply Like
  • FishDawg
    , contributor
    Comments (4) | Send Message
     
    You wrote:

     

    <<Three phases of trials on humans is the standard protocol, a process that takes years and would cost ordinarily in excess of $100 million.>>

     

    You need to do adequate research.

     

    It is unethical for phase II and III trials to be carried out on humans for diseases such as Ebola, where infecting someone to see if the drug worked has a high probability of leading to their death. That is why the Animal Rule exists (check the FDA website). TKM-Ebola is being developed under the Animal Rule, and will *never* be in a Phase II or III trial. It is currently being trialed in healthy volunteers to determine the safety of different doses. This is a Phase I trial.

     

    Good luck.
    20 Aug 2014, 09:40 AM Reply Like
  • Christopher Wallace
    , contributor
    Comments (1316) | Send Message
     
    Author’s reply » Wrong. For TKM-Ebola or any other drug to receive full FDA approval and be available for commercial sale it will have to go through Phase II and Phase III. What ever made you think that they infect people with a disease to test a drug???? Speaking of adequate research...
    20 Aug 2014, 10:05 AM Reply Like
  • mulletman99
    , contributor
    Comments (11) | Send Message
     
    Chris. You need to study the Animal Rule designation. Unless it is used in e.g., Africa during an actual outbreak, it will never be used in infected humans prior to approval. That's what the Animal Rule designation is. Also, the DoD has a history of stockpiling PRIOR to FDA approval.
    You overall thesis is flawed. Just look at RBC for guidance, who has TKM-Ebola valuated at 10% of their $30PT. In other words, their platform (that you fail to even mention) is worth 90% of their PT of $30, or $27.
    20 Aug 2014, 11:05 AM Reply Like
  • cskbugsear
    , contributor
    Comments (5) | Send Message
     
    good perspective Christopher!
    20 Aug 2014, 12:02 PM Reply Like
  • mulletman99
    , contributor
    Comments (11) | Send Message
     
    http://1.usa.gov/1naihDV
    In other words, all Tekmira needs:
    1) Animal efficacy data
    - Done. Shown 100% effective in non-human primates after getting 10x the lethal dose
    2) Human safety data
    - In process. Shown safe up 0.3mg/kg, which is the equivalent of the dose shown 100% effective in NHP and the dose they will move forward with.
    3) (Likely) Animal efficacy data at dose shown safe in humans.
    Needed
    20 Aug 2014, 12:20 PM Reply Like
  • mulletman99
    , contributor
    Comments (11) | Send Message
     
    Also something you "forgot" to mention. Correct that it will take in excess of $100 million. But....is is FULLY FUNDED by the Department of Defense.

     

    You should really do more DD on a company before publishing an article on it.....long or short.
    20 Aug 2014, 12:21 PM Reply Like
  • Christopher Wallace
    , contributor
    Comments (1316) | Send Message
     
    Author’s reply » If you think TKM-Ebola is a done deal, then you really need to do some DD. Ask yourself why the DoD is willing to put up $140 million for the development of a drug if it is already there. Risks remain with this one my friend. TKM-Ebola has not yet been proven to be efficacious. My article only seeks to point out that there is still a long way to go before this drug is ready for commercial sale. The stock is acting as if it is already there.
    20 Aug 2014, 12:55 PM Reply Like
  • mulletman99
    , contributor
    Comments (11) | Send Message
     
    I understand your overall point.
    However, if this article was intended to inform, it is full of mistakes and omissions that need to be corrected to truly inform.
    Examples so far include:
    1) Your complete lack of understanding on the Animal Rule
    2) The complete omission of what analysts (and myself) feel is 90% of the worth of the company
    3) The Ebola work being done is fully funded by the DoD. (This also includes lyophilization and delivery work, which increases overall value of the company with $0 spent).

     

    Again, a complete understanding of a company is needed before writing an informed article....long or short.
    20 Aug 2014, 01:27 PM Reply Like
  • Christopher Wallace
    , contributor
    Comments (1316) | Send Message
     
    Author’s reply » I look forward to reading your article.
    20 Aug 2014, 01:56 PM Reply Like
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