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Employed in healthcare for 35 years. Interested in novel and destructively innovative healthcare technologies.
  • Cellceutix Shares Are Undervalued: PolyMedix Assets Worth 50 Times Book Value 20 comments
    Jul 16, 2014 12:52 PM | about stocks: CTIX, RHHBY, PFE, AZN, CELG

    The purpose of this article is to describe an undervaluation in an non NASDAQ traded company named Cellceutix(OTCQB:CTIX). It is hoped that investors of all scales, particularly Hedge Funds managers, will benefit from long positions in Cellceutix.

    Cellceutix Buys PolyMedix For 4.9 Million

    On September 15th, 2013, Cellceutix bought the PolyMedix Assets for 4.9 million dollars. 2.1 million in cash, and 1.4 million Cellceutix shares of stock. PolyMedix, in the not to distant past traded with a market valuation of 227.4 million dollars, and was rated an outperform by a leading investment firm. At its trading capitalization height, PolyMedix primary asset and expectancy was an antibiotic drug named Brilacidin. After a successful 2A trial, Brilacidin did have doubters. PolyMedix was running low on money, in the precariousness of financial lack, a purported top heavy administration and doubts about Brilacidin's future trial performance. PolyMedix was unable to continue as a going concern.

    When Cellceutix entered bankruptcy court and purchased PolyMedix assets, they acquired all 9 of its drugs, laboratory equipment, patents and intellectual property rights, essentially all of PolyMedix core strategic coveted assets. Five months after the PolyMedix acquisition, on 02/25/14 Brilacidin began an FDA 2b trial. On 07/07/14 Cellceutix CEO Leo Ehrlich, announced that Brilacidin received a positive review by the Data Safety Monitoring Board. On 07/14/14 Mr Ehrlich, further announced that Cellceutix had made a significant breakthrough in Brilacidin's ability to treat diabetic foot ulcers.

    PolyMedix Assets Worth More Than 227 Million

    Based upon Brilacidin announcements plus other publicly available information, I believe that the primary hopes which lead to PolyMedix' capitalization being valued at 227 million dollars, have been both met and pleasantly surpassed by Cellceutix' management of Brilacidin. The recent 1.5 million dollar government grant awarded to move the former PolyMedix anti-fungal drugs from latent to patent, is enough money to plan and implement at least 7 very important pre-clinical studies to determine which drugs are the most promising to move toward toxicology studies and filing an FDA IND. Universities have converged to apply government and soft philanthropic R&D money to the defensin mimetic antibiotic portion of the PolyMedix portfolio. In short, if each of the PolyMedix compounds are likened to an engine, then the PolyMedix assets are ready to fire on all cylinders.

    Cellceutix shares traded at approximately $1.97, on September 15, 2013 with a total share capitalization of approximately 198 million dollars. When 1.4 million Cellceutix shares were issued to acquire the PolyMedix assets, combined with the cash, the PolyMedix assets cost approximately $4.9 million dollars. Currently, Cellceutix shares trade for 1.70 cents a share and the company has a share capitalization, (with shares having been issued since the acquisition) of 182 million dollars. The difference in capitalization from the date of the PolyMedix asset acquisition to present is 16 million dollars less. However, since that time, Cellceutix' Kevetrin has made value creating scientific progress in FDA 1. Prurisol has been stationary and should move forward or backward in perceived value within the next 45 days.

    The Catalyst For 250 to 400 Million Dollars

    When Brilacidin's FDA 2b trial is finished, should all end points be achieved, as expected. Then I believe that Cellceutix will have a minimum of 250 million, to a maximum of 400 million dollars of Brilacidin/PolyMedix asset value carried on its balance sheet, albeit incarnated into a book value of approximately 4.9 million dollars.

    The global need for new antibiotics, the defensin-mimetic technology and the FDA 2b, plus the straddle clinical performance of Brilacidin has done more than remove the clouds from the PolyMedix bankruptcy that hovered over Brilacidin. Cellceutix stock represents an undervalued Kevetrin, also Brilacidin is 250 to 400 million dollars of coiled capitalization value, compressed into the PolyMedix assets into a 4.9 million dollar balance sheet book value. This book to market asset value is ready to uncoil and spring forth into the shareholder family of Cellceutix. How long the slow waltz music will play before this proverbial Jack In The Box pops is certainly a question?

    The Method Of Valuation Is Not Comprehensive

    I do realize that my method of Cellceutix valuation is that of a believer's positive view of Cellceutix, it's FDA trials and PolyMedix assets. Cellceutix is a company that according to its March 31st, 2014 financials had approximately 5.1 million dollars in cash and a trailing cash burn rate of approximately $430,000 dollars a month. Indicating that something significant must happen in order for substantial dilution not to occur 6 to 9 months in future.

    Hypothetical Catalysts To Unlock The PolyMedix Value

    Here are two ways for a Hedge Fund Manager, to unlock the value of this coiled PolyMedix asset, within the Cellceutix shareholder family.

    Cellceutix now has approximately 107 Million shares. Quietly accumulate a 3.9% position, of 4,275,000 shares of Cellceutix common shares. I would imagine that a Hedge Fund manager could accomplish this with 10 to 11 million dollars of open market or private placement purchases.

    After Brilacidin completes its FDA 2b and the data is released, assuming that all endpoints are released.

    1. Publicly approach Cellceutix for a substantial(50%) royalty interest in the PolyMedix asset portfolio. Simply connect this inquiry with a stated desire to spin off the PolyMedix assets into a separate public company, with a capitalization ranging from between 250 to 400 million dollars. By doing this you will force the street to seriously discuss your inquiry and the discussion about the Brilacidin/PolyMedix valuation will ignite, over the amber's of scientific success and global human need.

    Scenario 1. The Hedge Fund manager should be able to cash out at substantial premium or become a part of new company NASDAQ listed company with multibillion dollar revenue potential based upon a nine drug pipeline. Also both outcomes could become part of the scenario.

    2. Publicly approach Cellceutix for total ownership of the PolyMedix portfolio, offer Cellceutix a 4% overriding royalty on the entire portfolio of 9 drugs for 60 million dollars, plus 1.4 million shares of Cellceutix stock.

    Scenario 2. If Cellceutix says no, your share position will probably benefit. You will have once again been the catalyst for a valuation of Cellceutix PolyMedix assets, which will could cause your shares to soar. If Cellceutix sells the 9 drug portfolio to you as a Hedge Fund manager, you could take the PolyMedix assets public or sell them to a major pharmaceutical. If you sold the PolyMedix assets to a major at $250,000,000, then you would book approximately $185,000,000 profit. The scenario to form a new company and launch an IPO would lessen the immediate cash profit heist, but through the new company a long term equity position could substantially increase the total return.

    Yes, a major could just offer $250 million to Cellceutix plus a 4% overriding royalty for the PolyMedix 9 drug portfolio. If a Hedge Fund manager owned 4,250,000 shares of Cellceutix stock, s/he could probably watch an investment that they spent 10 to 11 million dollars for, triple in price over a 3 to 9 month period of time.

    Not only for a Hedge Fund but any major like Pfizer, Roche Celgene (NASDAQ:CELG), Astra Zeneca (NYSE:AZN) or Amgen(NASDAQ:AMGN) that would appear to have an interest in Cellceutix' Kevetrin or Brilacidin, could use the 3.9% acquisition of shares as a point of leverage in competing for the licensing of a drug compound. Just imagine, they publicly approach, start talking with 4.25 million shares at $2.00, while they talk that 8.5 million dollars becomes 17 million dollars worth of stock, that can be used as part of the payment for the licensing of the compound that the major wants. If Cellceutix rejects the holder of the 3.9% position still has numerous wining options.

    My horizon for these multiples begins in August, and continues through April of 2015. Everything that I think assumes a successful 2b trial for Brilacidin, and that Kevetrin continues to perform as expected through FDA 1. Yes, I believe that Kevetrin will eventually claim at least 15 billion dollars of revenue a year, from the 35 billion dollars of annual revenue that Citigroup analyst Andrew Baum, predicts for immune activating cancer drugs. The Bologna FDA 2 trial could provide substantial validation for my belief in Kevetrin's economics. Roche (OTCMKTS:RHHBY) is probably the primary presence in the Bologna trial. As Pfizer (NYSE:PFE) is at Beth Israel, and possibly at Dana Farber. However, Kevetrin should be discussed in a separate article. I am long 10,000 shares of Cellceutix. Yes, Cellceutix shares involve a substantial degree of risk, and a person could loose there entire principal investment.

    Request Comments:Invite Improvement

    I invite others to comment on my facts and reasoning. If you can take this article and publish it as a premium article. Just grant me the honorable mention as a co researcher/contributor.

    Ella Ruth

    Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Additional disclosure: I am long 10,000 shares of Cellceutix common stock.

    Themes: Biotech, Hedge Funds Stocks: CTIX, RHHBY, PFE, AZN, CELG
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Comments (20)
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  • ellaruth
    , contributor
    Comments (770) | Send Message
     
    Author’s reply » Invest with a margin of safety by buying securities at deep discounts to their intrinsic value and unlocking that value through corporate events.
    Chris Demuth of Rangeley Capital

     

    I have borrowed this statement by Mr Demuth, because it best describes my attempt in writing this article.

     

    ER
    16 Jul 2014, 06:03 PM Reply Like
  • thementany
    , contributor
    Comments (26) | Send Message
     
    Excellent blog, Ella.
    There are many, many longs patiently waiting for trial results from B,P, and K, and have been for some time.
    Cellceutix represents potential massive upside with minimal downside. Positive B results will make that downside, from current levels, almost non-existent.
    Good times at CTIX.
    20 Jul 2014, 03:47 AM Reply Like
  • alexwv
    , contributor
    Comments (2) | Send Message
     
    This company is positioning itself to be a major breakthrough drug development company and is very much under the radar at the moment. Dr. Menon has extensive drug development experience with a major pharmaceutical and his brilliance in identifying revolutionary drugs will be the backbone of a multi-billion dollar company. Kevetrin is by far the 800lb. gorilla and will attracted major partnerships as a stand alone drug in efficacy and safety and in drug combinations with other major pharmaceutical companies.
    20 Jul 2014, 12:20 PM Reply Like
  • Tom Andries
    , contributor
    Comments (2) | Send Message
     
    I agree. Management is currently striving for a partnership with one of the majors. They'll undoubtedly get it as some of them already expressed interest. Big things to come... Only a matter of time.
    20 Jul 2014, 12:20 PM Reply Like
  • noretreat
    , contributor
    Comments (32) | Send Message
     
    You have captured the primary reasons why I have a substantial position in CTIX. The next 12 months will be interesting, that is for sure.
    20 Jul 2014, 01:47 PM Reply Like
  • frrol
    , contributor
    Comments (3) | Send Message
     
    Not sure what you meant writing that Kevetrin is "also 250 to 400 million dollars of coiled capitalization value, compressed from the PolyMedix assets into a 4.9 million dollar balance sheet book value." Kevetrin was not a PolyMedix asset.
    20 Jul 2014, 01:58 PM Reply Like
  • docjackos
    , contributor
    Comment (1) | Send Message
     
    I must admit that Kevetrin Phase 1 trial is going to undeniably prove that it's safe and to date there have been no serious side effects. No deaths and it has slowly progressed to cohort 8 and I believe 220 mg/kg.
    If Dr Menon's correlative data from rodents to humans is correct I believe they have seen efficacy as low as 80 mg/kg and positive p21 activation in the trial.
    The longer phase 1 continues the better because safety is proof positive for Kevetrin
    20 Jul 2014, 05:29 PM Reply Like
  • ellaruth
    , contributor
    Comments (770) | Send Message
     
    Author’s reply » frrol

     

    Thanks for correction. I did a tremendous job of obscuring the obvious. I think that it clear now. Thanks A Lot
    21 Jul 2014, 08:24 AM Reply Like
  • ellaruth
    , contributor
    Comments (770) | Send Message
     
    Author’s reply » docjackos

     

    You are right on. The safety combined with the final heat with several clusters of Cancer patients that will test with MTD should provide reasonable minds that can extrapolate with plenty of intellectual party food.

     

    The tiny side effects thus far, must be marked. However, with stage 4 Cancer patients bottled mountain spring water could cause an alleged minor side effect. I think we have made history already as far as chemotherapy related side effects go and also as far as immune system activation goes concomitantly with very low side effect chemotherapy. ER
    21 Jul 2014, 08:30 AM Reply Like
  • ellaruth
    , contributor
    Comments (770) | Send Message
     
    Author’s reply » Noretreat

     

    With a name like yours, General George Patton would certainy have wanted you as one of his commanders.
    So I can say to you that we must always show Leo and Dr Menon shareholder support. Any lowball offers from the majors , get told the famous Battle of The Bulge reply "NUTS". We can make it without them if we have to.
    21 Jul 2014, 08:33 AM Reply Like
  • ellaruth
    , contributor
    Comments (770) | Send Message
     
    Author’s reply » Tom Andries

     

    Yes I agree, however the best posture is to be able to move forward aggressively without the majors. They have no intent to do us any financial favor. Leo and Dr Menon, have done an excellent job balancing this.
    Remember contrary to the flow of IHUB, Roche has far more of a past paradigm and current merger acquisition philosophy consistent with paying for innovation than Pfizer. Also, Celgene likes structured deals that begin with a little less than 1 quarter of their net income.
    Roche and or Astra Zeneca are much better partners than either one of the others for Cellceutix.
    Imagine the way that a typical big pharma head of R&D would feel reporting to his or her board about Cellceutix' pipeline, R&D success and money spent versus theirs. Comfort driven executives will have to wait until they are horribly uncomfortable with idea of Cellceutix will become a company larger Celgene. Perhaps as big ------. It might be FDA stage 4 that brings them to this place. Roche is the best financially and philosophically. Cellceutix could very well become a Genetech. 1/2 now and 1/2 later. ER
    21 Jul 2014, 08:45 AM Reply Like
  • ellaruth
    , contributor
    Comments (770) | Send Message
     
    Author’s reply » alexwv

     

    I can sing AMEN, AMEN, AMEN to every phrase that you wrote.
    21 Jul 2014, 08:46 AM Reply Like
  • ellaruth
    , contributor
    Comments (770) | Send Message
     
    Author’s reply » Thementany
    I regard the downside of Cellceutix much like you do.
    Amongst penny stocks and small caps, I would describe it to having an ice cold watermelon on the desert, you can eat it so fast that you choke. The downside is that you might buy so much that you cannot pay next months rent. Right now the shares are stock in molasses. If a person bought too much with to short of a horizon, they are in trouble. ER
    21 Jul 2014, 08:52 AM Reply Like
  • gmmpa
    , contributor
    Comments (608) | Send Message
     
    ellaruth... Thank you for the fine summary of the Cellceutix story. I have been long since June 2012 and useful information was difficult to find. This company has great potential but maintains a very low profile and needs to improve its investor relations.
    20 Aug 2014, 08:17 AM Reply Like
  • ellaruth
    , contributor
    Comments (770) | Send Message
     
    Author’s reply » gmmpa

     

    I have devoted my mind to trying to think of both facts and possibilities for Cellceutix that may have been missed by others or perhaps ignored. You seem to recognize and appreciate this. I am grateful to you. Please read both the article and the comment section discussion on, THE TELEOLOGICAL EVIDENCE THAT KEVETRIN WORKS.
    Thanks ER

     

    http://seekingalpha.co...
    20 Aug 2014, 09:39 AM Reply Like
  • gmmpa
    , contributor
    Comments (608) | Send Message
     
    The initial reason that led me to start a position in CTIX was the science behind Kevetrin IP. It is a testimony to the Cellceutix principals that they recognized the value of the PolyMedix IP and took the initiative to broadened their pipeline and future shareholder value.
    20 Aug 2014, 08:36 PM Reply Like
  • ellaruth
    , contributor
    Comments (770) | Send Message
     
    Author’s reply » GMMPA end of 1st quarter 2015??

     

    I anticipate the possibility that CTIX may spin off the PMX assets into a newly listed NASDAQ company. I would expect that the new company would be valued between 400 to 500 million dollar in an IPO. Before that's happens big pharma will have one last chance to ante up or in 5 to 10 years they will face to new major biotechnology companies as significant competitors.

     

    A cash stock offer of $40 to $50 a share that will allow us to participate in the future of the drug portfolio in strong mid tier to major biopharmaceutical is what I think to be reasonable. The acquiring companies stock will eventually take off and probably multiply a couple of time over the following five years.

     

    ER
    21 Aug 2014, 12:18 AM Reply Like
  • ellaruth
    , contributor
    Comments (770) | Send Message
     
    Author’s reply » The PolyMedix Assets are now worth over 100 times their book value. After Brilacidin proceeds through FDA 3 and two other straddling FDA 2 trials. If another one of the PolyMedix drugs moves through tox study, then the PMX assets will approach a value of 500 times their acquisition value.

     

    Ella Ruth
    24 Oct 2014, 12:16 PM Reply Like
  • sethgodfrey
    , contributor
    Comment (1) | Send Message
     
    Good blog
    12 Jan, 01:41 PM Reply Like
  • ellaruth
    , contributor
    Comments (770) | Send Message
     
    Author’s reply » What a fantastic name that you have Seth, God. If you live up to it, you are the worlds greatest man.
    12 Jan, 11:32 PM Reply Like
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