Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Cellceutix Shares Are Undervalued: PolyMedix Assets Worth 50 Times Book Value

|Includes:AZN, CELG, Cellceutix Corp. (CTIX), PFE, RHHBY

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.

Stocks: CTIX, RHHBY, PFE, AZN, CELG