9 Compelling Reasons To Buy Opexa Therapeutics Right Now
Aug 15 2013, 12:44 |
(1) Shares Just Above Cash Value
Opexa just completed an $18 million capital raise, bolstering the company's balance sheet with a solid cash buffer that should be welcomed by investors. Combined with the existing cash on its balance sheet, Opexa is currently trading just barely above its net cash. Investors are effectively paying nothing for the business at current levels; a virtually free option on a potentially game-changing MS drug as well as other possible indications.
(2) Elimination of Capital Raise Overhang
A dilutive capital raise at a significant discount to market is a continual concern for investors in speculative small-cap biotech stocks. The only reason Opexa's capital raise appears to have been priced at a large discount is that its shares staged a massive run immediately prior to the funding. In actuality, shares were effectively priced at the market. Notably, Opexa did not issue warrants as part of this offering, thus minimizing the dilutive consequences to exiting shareholders. This is in stark contrast to many small-cap biotech financings, in which investors demand dilutive warrants in addition to discounted shares as an incentive to participate. Finally, as Merck Serono (MRK.DE) is wholly responsible for funding clinical development and regulatory and commercialization activities for the MS program (see below), Opexa has eliminated the overhang of a capital raise for existing shareholders for the foreseeable future. In fact, on this week's conference call, CFO Karthik Radhakrishnan announced that the company, with a monthly burn rate of $1.2 million/month,now has sufficient capital to take it to through the second half of 2014, well beyond what most comparable biotechs can claim.
(3) Collaboration with Merck Serono
Most speculative biotech companies are in a continual desperate search for a big-name partner to help support and finance their drug pipeline. Opexa has already secured such a relationship with the industry giant Merck Serono for its flagship drug Tcelna . Additional details of this significant collaboration can be found here. As noted above, Merck is responsible for funding the entirety of clinical and regulatory expenses, and Opexa is eligible for payments of up to $220 million. It is critical to note, as CEO Neil Warma emphasized in the quarterly conference call, Opexa has retained full rights to all other indications for Tcelna outside of MS.
(4) Insider Purchase
The CFO of Opexa, Karthik Radhakrishnan, just disclosed the purchase of 50,000 shares at $1.5, where the company's stock offering was priced. An executive's participation in the company's financing is looked upon favorably by the investment community as a sign of confidence in its future prospects. An outside investor can currently purchase shares on the open market at a discount to the CFO's shares, representing an even greater bargain. Additionally, it is worth noting that no insider sales have occurred at the company in almost 4 years.
(5) Historically Favorable Risk-Reward
Warren Buffet famously quipped, "Be Fearful When Others Are Greedy and Greedy When Others Are Fearful." Opexa shares are trading near all time lows, and are 75% off 52 week highs, despite a number of material developments that have markedly improved the prospects of the company. These include a strengthening of the company's cash position arising from royalty payments and capital raises, in addition to the Merck collaboration discussed above. Virtually all other equally (or even more) speculative biotech stocks trade with a market capitalization five to ten times higher than Opexa's, including those of Peregrine Pharamaceuticals (PPHM), Cell Therapeutics (CTIC), Geron Corporation (GERN), AVEO Pharma (AVEO), and XOMA Corporation (XOMA).
Opexa shares present a compelling buy opportunity for the speculative investor at current levels. Currently, the market is assigning a near-zero probability of Tcelna's efficacy in the treatment of multiple sclerosis (MS). Given that MS is such a notoriously challenging disease to conquer, the first indication that Tcelna provides relief to MS patients will literally drive the shares 10x overnight.
(6) Catalyst Driven Momentum Stock
From a longer-term investment perspective, the success of Opexa's drug pipeline will ultimately determine how high the stock is valued. In the interim, a variety of other factors play a large part in where shares of Opexa trade. Opexa is the ultimate biotech story stock, attracting a wide array of speculative and momentum investors. What this means is that any whiff of positive news, or even vague rumors, will and have moved this stock dramatically. One look at the multi-year chart will verify this phenomenon. As a head trader at briefing.com, who recently took a stake in Opexa, describes it:
"I've taken a Swing Long position in the name with plans to stash away in my spec portfolio. I view it as a biotech hype name that will be hyped again at some point b/c it has a story that can be sold. (1.37 -0.04) I'm looking at it as a situation where I'm willing to risk 50% to potentially make 200%. It's a total spec play, not an investment based on fundamentals. I may be in this for months/quarters, but it is a relatively small position for me."
In all likelihood, shares of Opexa will enjoy a multitude substantial rallies well before Phase 3 clinical results are available, providing less patient investors with an opportunity to profit .