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Theralase: Big Pharma Bait

|Includes:Theralase Technologies Inc. (TLTFF)

I was looking at the 1Q 2014 Investor Presentation Materials of Canadian anti-cancer drug developer Theralase Technologies Inc.(Theralase (OTCPK:TLTFF))In those materials there is a list of eight deals where relatively small biotech companies connected with Big Pharma for commercialization and co-development of their discoveries.

The deals ranged in value from 466 million plus royalties to 1 billion plus royalties. I wanted to do a quick check to see what the effect on the share price was. A number of the companies involved in the deals were private however I was able to get data for two deals:

Genentech /Seattle Genetics (NASDAQ:SGEN) Aug 2010

12 million upfront and milestone payment of up to 900 million dollars

pre-deal price $9.12 post deal $11.69 current $50.00

 

Novartis (NYSE:NVS)/Immunogen (NASDAQ:IMGN) Oct 2010

45 million with milestone payments of up to $200 million per target reached.

Pre-deal price $5.16 post deal $9.94 current $16.05

Click to enlarge

There are, of course, dozens of caveats, but what these deals suggest is that once Big Pharma has done its due diligence and put skin in the game a relatively small, innovative company is likely to see its shares rise in the short term and, perhaps, more importantly, soar over the next couple of years.

At the time of deals Seattle Genetics had 100 million shares outstanding, Immunogen had just under 60 million.

The investment opportunity these deals underline is as much about timing as it is about deal value.

A company can take several years to come to the place where a way forward to human trials of a particular drug or agent appears imminent.

Theralase is right on the edge.

February 13, 2014 Theralase put out a press release. In it appears this quote,

Dr. Michael Jewett, Clinical Principal Scientific Investigator at Princess Margaret Cancer Centre, University Health Network and University of Toronto stated that, "I am extremely encouraged by the results of this scientific work and the implications that it may have in the destruction of bladder Transitional Cell Carcinoma, as the bladder is traditionally known as a very low oxygen environment. There has not been a new drug approved for bladder cancer since 1998 and I am looking forward to working with the Theralase team to initiate a Phase 1 / 2 clinical trial in 1Q2015."
Read more at http://www.stockhouse.com/news/press-releases/2014/02/13/theralase-demonstrates-bacteria-destruction-in-low-oxygen-environments-unique#lfJWSdFfRE21YbyQ.99

Bladder cancer is the fifth most common cancer in America and its treatment costs over 3 billion dollars a year.

With Theralase shares trading between .40-.50 the opportunity to acquire Theralase just before it is on Big Pharma's radar looks attractive. Volume is picking up and the company seems to have realized that a steady news flow is needed to bring the stock to the market's attention.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Stocks: TLTFF