Wednesday, March 29, 2023

Buying and selling Effectively Under Money, Strategic Alternate options

This might be a comparatively fast one, thanks to Writser for pointing me on this course.

Magenta Therapeutics (MGTA) (~$47MM market cap) is one other addition to my rising basket of failed biotechnology firms which can be pursuing strategic options like a reverse merger or liquidation.  Magenta is a scientific stage biotech centered on enhancing stem cell transplantation.  Their main product, MGTA-117, initially had positive data readouts in December for his or her ongoing Section 1/2 trial, however shortly after, sufferers using higher doses started experiencing adverse effects, culminating with the loss of life of 1 trial participant and the following shutdown of the MGTA-117 clinical trial.  Then yesterday afternoon, Magenta introduced they had been going to discover strategic options, the press release is somewhat obscure and generic.  However just like SESN and others, I anticipate Magenta first making an attempt to discover a buzzy reverse merger with a extra promising biotech, if that does not work, pursue a liquidation.

Magenta’s steadiness sheet is pretty easy, that they had $128.3MM in money and treasuries as of 9/30, no debt aside from subleased area in a Cambridge, MA workplace/lab advanced.

Since we’re getting near half method by Q1, I annualized the Q3 burn price for 2 quarters.  The corporate hasn’t given any preliminary indication of eliminating their workforce (as of the final 10-Okay, that they had 75 folks), however I anticipate that to comply with shortly, together with breaking their lease.  Cambridge is a biotech sizzling spot, Magenta or the first lessee should not have an excessive amount of bother discovering a brand new tenant.  Be happy to make your personal assumptions, however I provide you with MGTA buying and selling at a few 40% low cost to proforma web money even after spiking on the information in the present day.  By way of different property, Magenta does have $247.2MM in NOLs and two different early stage product candidates (one has a Section 2 trial ongoing), however as at all times, tough to place a worth on these.

The first danger right here could possibly be the corporate deciding to double down on their two different early stage merchandise, however the low cost is extensive sufficient right here to warrant an add to the basket.

Disclosure: I personal shares of MGTA

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