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Player Avatar zzlangerhans (99.77) Submitted: 11/10/2011 8:06:38 PM : Outperform Start Price: $0.91 MSTX Score: -54.30

Cash plays are favorites of mine when I'm expecting a significant correction in an overbought market. If the market cap remains stable in a broad market decline I usually score well on the pick. If the market cap declines even further below cash then I've identified a strong potential GBMB purchase. Today I'll add Adventrx to Vanda, Targacept, and Insmed.

The market cap of 24M is backed by cash of 38M as of the recent earnings statement. Burn runs at 2-4M, so the company has several quarters to pull a rabbit out of their hat before cash runs down to the current cap. Exelbine seems cooked and ANX-514 has failed to inspire, so I suspect the rabbit will be cheaply acquired sickle cell drug poloxamer 188. I'm not ready to drop a buy on Adventrx yet, although the cash looks meaty. If indiscriminate broad market flight drops the share price below 0.8, I might be there to pick up the pieces.

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Member Avatar TSIF (99.96) Submitted: 11/11/2011 4:26:56 PM
Recs: 0

Apparently they weren't as impressed with their cash balance as you were! ;)
Why is it that the biophams who seem the most solid in their cash position vs burn rate find it necessary to do a heavy dilution?? Clearly it's a lack of confidence, but then again the buyer of the 10 Million share secondary at $0.80 with options at $1.10 must think theirs some spikes left in the dog......
It's always confusing to me when you have a buyer at these levels AND a desire for the company to dilute so far below market. Good luck...

Member Avatar materialsman92 (35.34) Submitted: 11/16/2011 12:31:46 PM
Recs: 0

Market cap is now 16.6M but what I wonder is why they would offer more shares to investors if they have enough cash on hand. Perhaps they see some difficulty ahead? Also I don't know too much about their drugs but aren't they just generics of existing drugs with not much (this is where I don't know) savings or noticable improvements to warrant purchases or contracts with major distributors. ZZ would you be a buyer at these levels? What do you think about the new public offering?

Thanks

Member Avatar zzlangerhans (99.77) Submitted: 11/17/2011 12:14:36 AM
Recs: 1

Obviously, I wasn't expecting the secondary. Shades of CytRx.

The new share count will be 47.7M. The true market cap is therefore 30M using today's closing share price of 0.62. The cash at the end of next quarter including the financing will be 54M minus about 3M burn, or 51M. So they've gone from being a 24M cap company with 38M in cash to being a 30M cap company with 51M in cash. Looks like a better deal to me, but CytRx dropped another 20% after the initial shock and then quivered for months, starting to recover only recently. So I'm in no rush.

The problem is that Adventrx is a bad company with a terrible track record and an unabashed willingness to chuck their investors under a giant double decker bus. On the other hand, they're clearly positioning themselves for survival through completion of a pediatric phase III trial of poloxamer 188. Given the cash of 51M and quarterly burn rate of 2-4M, it's hard to see how this stock doesn't end up moving higher at some point. But I'm being very conservative with cash right now, and I'm not going to fight downward momentum.

I'd look at starting a 10000 share position at 0.55 and possibly doubling down at a lower level. But no promises.

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