Synageva BioPharma Corp. (NASDAQ:GEVA)

CAPS Rating: 1 out of 5

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Player Avatar zzlangerhans (99.77) Submitted: 12/31/2012 1:07:38 AM : Underperform Start Price: $46.14 GEVA Score: +14.78

I've spent a couple of hours going over Synageva and for the life of me I can't figure out why the market cap is 1.1B instead of 200M. The strongest support for the current share price seems to come from investment bank sell-side analysts, whose recommendations I have found to be completely worthless in biopharma.
I imagine that Synageva bulls, who maintain a low profile, look to Alexion as a model for a multi-billion company treating a single orphan disease. However, no other companies developing replacement therapies for orphan congenital diseases have come close to Alexion's success. Biomarin is the closest, and they have multiple drugs in the clinic. Protalix hasn't really popped after receiving approval of taliglucerase, and Amicus has struggled with clinical trials.

Synageva promotes a 25/million live birth incidence of CESD apparently based on the findings of this article: http://atvb.ahajournals.org/content/27/8/1866.full.pdf . However, the authors of the article point out that their estimates of CESD incidence are much higher than expected from the number of cases reported in the literature. Their conclusion is that CESD is underdiagnosed, but there's no guarantee that this situation will change to produce the case numbers expected by Synageva anytime soon.

Synageva has only completed a single phase I/II trial of sebelipase alfa for CESD, and to the best of my knowledge has not announced concrete plans for further trials. Other proposed ERT's are still in preclinical development and the company burns about 10M/quarter. To Synageva's credit, they were able to raise about 200M in dilutive financing in 2012 indicating that they have substantial backing in the secondary markets.

I also find it concerning that Synageva obtained their public listing via a reverse merger with zombie biopharma Trimeris in July 2011. That gave Synageva some cash, a dying HIV drug called Fuzeon, and the ability to avoid the scrutiny that comes with an IPO. I mentioned Protalix earlier. The current valuation of Synageva reminds me of that of Protalix right before they crushed their shareholders with an 80% below market dilutive financing in 2007. Food for thought.

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Member Avatar pavlos1971 (99.53) Submitted: 1/8/2013 10:07:14 AM
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I took a short position in RL after last week's 100M dilutive financing. I don't see the point of the stock price, and I'd like it for somebody to explain the bull thesis to me. I'm guessing that in addition to the points that you mention, the bull thesis probably puts lots of weight on a single person, Synageva's CEO, Sanj Patel. He indeed appears to have impressive and relevant background, and has made some good moves. (In addition to helping get cash from investors, he established an office in Lexington MA, and not only Athens GA, the location of ad Avagenics.) If I were an angel investor, I might have supported Patel as a startup founder, but if I were a Wall Street analyst, how much would I change my valuation of a 1.2B baby biotech because of Sanj Patel?

Member Avatar pavlos1971 (99.53) Submitted: 1/16/2013 7:13:26 AM
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Another interesting factor for this company is the current involvement of the Baker brothers who own a huge chunk of their public shares. One of brothers was involved in Trimeris since before the reverse merger, so perhaps these investors have a plan, though not a very committed one (they had exited their position completely about a year ago). I'm sticking to my short for now, and may increase my position if the stock exceeds 60. The options market for this company is lame, so I can't get puts.

Member Avatar zzlangerhans (99.77) Submitted: 3/28/2013 4:06:36 PM
Recs: 1

Just shorted 100 shares at 55.02. Couldn't get them on Schwab but no problem on TDAmeritrade. Guess TD will be my shorting brokerage, Schwab is definitely better for going long.

Member Avatar zzlangerhans (99.77) Submitted: 5/9/2013 1:23:29 PM
Recs: 1

Closed my short at 46.88 for a profit of $800, good way to start my shorting career.

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