Endocyte, Inc. (NASDAQ:ECYT)

CAPS Rating: 3 out of 5

Recs

5
Player Avatar BuffettJunior1 (96.96) Submitted: 12/13/2011 9:26:22 PM : Outperform Start Price: $3.52 ECYT Score: +19.58

Endocyte Inc. (ECYT) is a bio-pharmaceutical Company developing targeted therapies for the treatment of cancer and inflammatory diseases. It uses its proprietary technology to create novel small molecule drug conjugates, or SMDCs, and companion imaging diagnose. Company website - http://www.endocyte.com/The company currently has three product candidates in phase I clinical trials and one product in a phase II clinical trial. Reason for the dramatic drop in the share price: The company’s stock plunged over 65 percent to $3.57 after it released disappointing results from supplemental analyses of a Phase II clinical trial for its cancer therapy EC145. Endocyte has been testing the compound in conjunction with other cancer-fighting agents in women with platinum-resistant ovarian cancer. The analyses showed that EC145 did not help patients live longer.My reason for recommending this obviously speculative stock is not because of its future prospects. In fact, I really could care less about its future prospects. The reason I am recommending this stock is because it’s currently trading at just about its Net Current Asset Value (NCAV). Normally I try to avoid stocks that trade at or below their NCAV. Most of the time they are either Chinese small caps (frauds) or the current assets are mostly made up of inventory. This company on the other had is one of those rare opportunities, it is not a fraud and 99 percent of the current assets are made up of cash and short-term investments. The company’s NCAV is $120.89 million, and that’s after removing prepaid expenses. Below are my calculations: Current Assets – Prepaid Expenses = 140.00 – 0.81 = 139.19 Total Liabilities = 18.30 Current Assets – Total Liabilities = 139.19 - 18.30 = 120.89 Another thing I liked about this particular biotech is that its cash burn rate is very low. According to my calculations the company’s average monthly cash burn rate is about $1.507 million. I calculated this by dividing the company’s annual Free Cash Flow (negative) and dividing it by 12 (months). I was able to acquire 3 years’ worth of financial statements so I calculated the cash burn rate by taking the average of the 3 years. (This company only recently went public, which is the reason I was only able to get 3 years of financial statements.) The company has a total of $138.87 million in cash and short-term investments. By dividing this number by the cash burn rate ($1.507 million), I have come to the conclusion that the company can survive for about 92.15 months or 7.68 years. This is if they don’t take on any additional debt or sell more stock.As you can see by now there is a large margin of safety here. If this stock continues dropping it could be a huge bargain! All of the company’s future prospects are not of any concern to me. If the company does develop some new life-changing drug it will just be icing on the cake.

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Member Avatar BuffettJunior1 (96.96) Submitted: 12/27/2011 3:34:56 PM
Recs: 1

I honestly don't know why it does this when I post something. It puts everything together and makes it hard to read. Here is the same thing but easier to read.

Endocyte Inc. (ECYT) is a bio-pharmaceutical Company developing targeted therapies for the treatment of cancer and inflammatory diseases. It uses its proprietary technology to create novel small molecule drug conjugates, or SMDCs, and companion imaging diagnose. Company website - http://www.endocyte.com/

The company currently has three product candidates in phase I clinical trials and one product in a phase II clinical trial.

Reason for the dramatic drop in the share price:
The company’s stock plunged over 65 percent to $3.57 after it
released disappointing results from supplemental analyses of a
Phase II clinical trial for its cancer therapy EC145. Endocyte has
been testing the compound in conjunction with other cancer-fighting
agents in women with platinum-resistant ovarian cancer. The
analyses showed that EC145 did not help patients live longer.

My reason for recommending this obviously speculative stock is not because of its future prospects. In fact, I really could care less about its future prospects. The reason I am recommending this stock is because it’s currently trading at just about its Net Current Asset Value (NCAV). Normally I try to avoid stocks that trade at or below their NCAV. Most of the time they are either Chinese small caps (frauds) or the current assets are mostly made up of inventory. This company on the other had is one of those rare opportunities, it is not a fraud and 99 percent of the current assets are made up of cash and short-term investments.

The company’s NCAV is $120.89 million, and that’s after removing prepaid expenses. Below are my calculations:

Current Assets – Prepaid Expenses = 140.00 – 0.81 = 139.19
Total Liabilities = 18.30
Current Assets – Total Liabilities = 139.19 - 18.30 = 120.89

Another thing I liked about this particular biotech is that its cash burn rate is very low. According to my calculations the company’s average monthly cash burn rate is about $1.507 million. I calculated this by dividing the company’s annual Free Cash Flow (negative) and dividing it by 12 (months). I was able to acquire 3 years’ worth of financial statements so I calculated the cash burn rate by taking the average of the 3 years. (This company only recently went public, which is the reason I was only able to get 3 years of financial statements.)

The company has a total of $138.87 million in cash and short-term investments. By dividing this number by the cash burn rate ($1.507 million), I have come to the conclusion that the company can survive for about 92.15 months or 7.68 years. This is if they don’t take on any additional debt or sell more stock.

As you can see by now there is a large margin of safety here. If this stock continues dropping it could be a huge bargain! All of the company’s future prospects are not of any concern to me. If the company does develop some new life-changing drug it will just be icing on the cake.

Member Avatar theHisO (< 20) Submitted: 1/1/2012 12:13:18 PM
Recs: 1

i found it from an insider trading alert and did some research to come to the same conclusions at you. can't remember actual insider purchase, but i usually only look into it if it's a very large one, the timing, and who it is making the buy in. i know for this company it was significant and it has started a slow climb up since then it seems.

Member Avatar BuffettJunior1 (96.96) Submitted: 3/14/2012 11:34:36 AM
Recs: 0

I bought this stock when it was trading at $3.20 per share, looks like I did pretty well!

Member Avatar peterod (87.33) Submitted: 3/14/2012 10:32:12 PM
Recs: 1

a free cigar butt....nice job!

Member Avatar BuffettJunior1 (96.96) Submitted: 4/18/2012 11:03:46 AM
Recs: 0

ECYT is still extremely undervalued; investors who try to short this stock will be very disappointed.

Member Avatar DrGoldin (99.72) Submitted: 1/24/2013 12:57:03 AM
Recs: 0

A year later, do you still think it's undervalued? It's selling for over 3x book value now, and margins, returns, and operating cash flow are all very negative. Just wondering why you didn't close this out a long time ago.

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