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Navigating the Minefield of Micro-Cap Biotechs



November 22, 2008 – Comments (0) | RELATED TICKERS: CYTK , ASTX.DL , XOMA

Navigating the Minefield of Micro-Cap Biotechs

[web link to stats and list of all 52 companies]

The accompanying table includes 52 companies with market caps below the $150M minimum for inclusion in the ETF Innovators [ETFI] Emerging Bio-Pharma Index. While the performance is terrible with an average loss of nearly 50%, keep in mind that several buyouts in the out-of-favor micro-cap biotech space have been announced over the past year with 100%-plus takeover premiums, including under-the-radar names such as:

1.) SGX Pharma (SGXP) was acquired for $64M cash by Eli Lilly (LLY) for its cancer drug discovery platform

2.) Kosan Biosciences (KOSN) was acquired by Bristol-Myers (BMY) for its cancer drug pipeline

3.) Barrier Therapeutics (BTRX) was acquired by privately-held Stiefel Labs

4.) Pfizer's (PFE) $164M cash buyout of cancer drug developer Coley Pharma (COLY)

5.) The most recent and extreme example includes GlaxoSmithKline's (GSK) $57M buyout of Genelabs (GNLB) for an astounding premium of over 400% for the latter's hepatitis C clinical development assets

The common theme for these buyouts includes spending a very small amount of money relative to the huge size of the acquiring big pharma companies to acquire assets and expertise for early stage drug discovery and development – with three of the five aforementioned deals focused on cancer drug development. As a starting point for further investment research, companies on the list of 52 with market caps below $150M which have cancer drug candidates and/or discovery platforms include Cytokinetics (CYTK), ArQule (ARQL), Immunomedics (IMMU), Infinity Pharma (INFI), Ardea Biosciences (RDEA), Xoma Ltd. (XOMA), SuperGen (SUPG), Ariad Pharma (ARIA), Celldex Therapeutics (CLDX), and Vical (VICL).

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