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AndrewGreenBull (99.19)

First Pick in 2010: TELK

Recs

49

January 13, 2010 – Comments (8) | RELATED TICKERS: CELG , ACT , CTIC

HSKA & HEPH both have about 50% gain since late December after my introduction post, and I believe that there is still more room for these two picks to rise. While waiting for the big time to come, I would like to introduce another small cap biomedical stock which has several catalysts in the near term.  

TELK was once a $20 stock when billionaire Carl Icahn became a shareholder of the company and increased the stake in 2006, but after that, it fell like a rock to $0.27 because of the unsatisfactory results of its ovarian and lung cancer drug trials and the worldwide economic crisis. 

As the U.S. economy gradually improved and the clinical trials are back on the right track, TELK has bottomed out since last April and is trading around $0.80. However, this price is still grossly underestimated according to the financial situation and the potential market of TELK’s drug candidates. As my first pick in 2010, I believe that with the approach of short-term catalysts, TELK will have greater room for its stock price to grow. 

TELK Overview: Telik, Inc. is a biopharmaceutical company focused on discovering and developing small molecule drugs for cancer and inflammatory diseases treatment. The company has two leading drug candidates, one is TELINTRA® (TLK199) which is currently in Phase 2 clinical development for myelodysplastic syndrome(MDS), and severe chronic idiopathic neutropenia(SCN); another one is TELCYTA® (TLK286), a cancer cell-activated chemotherapeutic that has shown clinical activity in a Phase 2 and Phase 3 clinical trials in advanced ovarian cancer, non-small cell lung cancer, colon cancer and breast cancer. Both product candidates are developed through the use of the company’s proprietary TRAP® technology, which enables the rapid discovery and efficient optimization of small molecule drug candidates. 

*MDS is a form of pre-leukemia in which the bone marrow produces insufficient levels of one or more of the 3 major blood elements (white blood cells, red blood cells and platelets). 

*SCN is a blood disordered typified by a very low neutrophil counts. Neutrophils are very important in defending the body against bacterial infections, and therefore, a patient with too few neutrophils is more susceptible to bacterial infections. 

* Non-small cell lung cancer is the most common type of lung cancer, accounting for about 85% of lung cancer. Non-small cell lung cancer drug sales in 2008 have been as high as 3.5 billion dollars according to the latest statistics, and this market is expected to expand to 10 billion dollars by 2018. 

* Ovarian cancer has become the fifth leading causes of death in women in the United States. More than 25,000 women are diagnosed with ovarian cancer, a disease that kills nearly 15,000 women every year. This is also a multi-billion dollars market. 

TELK is financially sound. As we see from 10-Q, TELK has around 50 million dollars on balance sheet with no debt, but the market cap is only about 43 million. This means that if TELK close the company right now, share holders will get better price of their shares plus free technology and drug candidates which TELK already spent about 500 million dollars on them. We can tell that the current price has been seriously underestimated. 

TELK has no NASDAQ listing problem in the near-term. On January 5, 2010, TELK received notice from NASDAQ that the Company's application to transfer listing of its common stock from The NASDAQ Global Market to The NASDAQ Capital Market had been approved. This means that TELK will not worry about this problem for a long time. Further more, when a number of catalysts are around the corner, I am expecting a big rally of TELK and get rid of this embarrassing situation once and for all. 

TELK’s short-term catalysts: 

1, TELINTRA phase 2 clinical trial of MDS:

 TELINTRA phase 2 clinical trial of MDS is estimated to finish final data collection of primary outcome by last December according to clinicaltrials.gov, and the data is expected be released in this month. When TELK announced positive phase 1-2a result of its second drug candidate TELCYTA last September, its stock price jumped to $1.4. Will it be a bigger rally this time?

 2,TELINTRA phase 2 clinical trial of SCN: 

ELINTRA phase 2 clinical trial of SCN is estimated to finish final data collection of primary outcome by this December according to clinicaltrials.gov, but the interim clinical data should be a lot earlier than that. This study was started in last May, and if TELK released interim data based on the 6 months cycle like most other biomed companies, news should be released in this month. 

3, TELCYTA’s prospect for collaboration: 

TELK was hit hard by the unsatisfactory result of TELCYTA’S phase 3 clinical trial in 2006, but there were actually 5 trials ongoing at that time, 4 of them failed, and the fifth one initiated in May 2006 to evaluate TELCYTA in combination with PLD versus PLD alone as second line therapy in platinum refractory or resistant ovarian cancer. On October 29, 2008, TELK announced top-line results from the ASSIST-5 trial demonstrating that statistically significant improvement was observed in a sub-set of patients with platinum refractory or primary resistant disease. TELK is currently seeking a partnership for TELCYTA for further development.  Once this drug candidate with multi-billion dollars potential market got a deal like OPXA & ATHX, TELK will be one of the biggest gainers in 2010 for sure.

 4, TELINTRA prospect for collaboration:  

Drug maker Celgene already has FDA approved drug Revlimid for myelodysplastic syndromes, but the pharmaceutical industry giant still tossed 2.9 billion dollars to merge Pharmion for its Vidaza in 2007 in order to built up a monopolistic position in the hematology field. So will Celgene be kind enough to let TELK develop a next generation drug independently for hematologic disease and challenge its dominance status in this area, especially when TELK is willing to find collaboration? The possibility is pretty low, and if so, we may see a big deal accompanying with TELINTRA’s phase 2 result for TELK soon. 

So will TELK be the next ATHX? Only time will tell. But for my opinion, the situation is more like a combination of SNSS and ATHX. 

*Disclaimer: The author of this post is not a licensed analyst and the purpose of it is for information sharing and discussion only, not recommendation for any stock buying and selling activity. Please do your own research before making any trading decision.

8 Comments – Post Your Own

#1) On January 13, 2010 at 9:29 AM, meiwaku (< 20) wrote:

man, I was lucky enought to follow those two, great picks! you rock!

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#2) On January 13, 2010 at 10:14 AM, huaerjin (< 20) wrote:

thanks

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#3) On January 13, 2010 at 6:17 PM, RainierMan (78.14) wrote:

Nice write up. I hadn't been aware of TELK, even though I dabble a lot in the bios. This looks like an interesting one, for sure.

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#4) On January 13, 2010 at 6:33 PM, Pennyperson (< 20) wrote:

Looks like a nice play in RW..may give it a shot with a little more DD. Great post and right up my Penny lane ;)

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#5) On January 13, 2010 at 11:15 PM, AndrewGreenBull (99.19) wrote:

TKS, TELK was under a big profit-taking pressure above .90, but I believe that it will break the $1 resistance in days.

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#6) On January 15, 2010 at 8:39 AM, hrc777 (< 20) wrote:

Dont get me wrong this is a good post with lots of good info, but I do question your cash analysis.  Dec/08 they had cash, short term investments + long term investments total $62 million.  On the Sept 10Q the long term investment had been cashed in and cash and short term investments total $44 million.  If this cash burn remains averaging $1.5/month we'll be down to about 68 cents/share by the end of the month.  Still pretty good.......   hrc

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#7) On January 24, 2010 at 2:02 PM, zzlangerhans (99.77) wrote:

Buyer beware! I was directed to this post by another player. Telik is far, far down the list of any small cap biotech any rational thinking person would want to invest in. These remorselessly self-promoting companies rely on short memories in the investing world and a constant supply of new retail speculators who can't or won't look a few years back in the history of these companies to get the whole picture.

In the biotech community, Telik is famous for their continuation of the ASSIST-1 trial of Telcyta in ovarian cancer despite becoming aware that Telcyta treatment was shortening life expectancy by months. In other words, it kills women. Review this link. The ASSIST-5 trial was a failure. Post-hoc subset analysis is an old trick to keep failed drugs alive. The company basically admitted that Telcyta is dead in this press release. Telik has been "seeking a partner" for Telcyta for years now but don't hold your breath. This drug is deceased, expired, kaput and thank God for that.

The company does have cash and was a reasonable speculative buy when the cash position was double the market cap, like many other weak biotechs thathave also doubled or tripled. Now, you could make a cynical bet that their upward momentum based on sunshine and farts will continue but be aware you are playing roulette.

Never, ever buy a small cap biotech stock because someone wrote it up and made it sound good. You will get destroyed. If you'd like to learn more about mistakes to be made in biotech investing, look here.

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#8) On December 26, 2013 at 7:25 PM, portefeuille (99.60) wrote:



enlarge

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