AXO has more than doubled from the lows of a few weeks ago. It was up 31% today on what appears to be an inconsequential news release. I would expect it to give some back tomorrow but I won't be selling any myself as it is still the most severely undervalued of all Canadian biotechs. Here's an excerpt from a recent Cannaccord report comparing market caps of all the Canadian biotechs by stage of approval (sorry I don't have a link, this comes by e-mail):
"The companies in Table 2 are the closest to the benchmark represented
by QLT. For historical comparison, during the 12-month period
finishing about one month before release of the Phase III efficacy
data for Visudyne, the market valuation of QLT fluctuated between
about $400M and $650M. The QLT valuation during the period of the FDA
review through to the advisory committee meeting was between about $2B
and $4B. Within this group of companies, AltaRex is obviously an
outlier, probably due to both its low cash position and concern about
the quality of the Phase II data on Ovarex. Micrologix also has a
lower valuation, probably due to the fact that there is no direct
efficacy data from the treatment of CVC patients from the Phase II
studies. The market valuation of Angiotech is substantially higher
because it has multiple applications of paclitaxel in clinical
development (stents, MS, rheumatoid arthritis), good clinical data,
marketing partners for the stents, US analyst coverage and US
institutional ownership. There is enormous upside from the average
market valuation of $467M (excluding AXO) to the QLT benchmark for
those companies that report good Phase III data."
The comment about the low cash position is fair but the one about the phase 2 data is not IMO. If that is an issue, it will cease to be when the data from the big study is released later this year. If AXO were to move up to just the average market cap of the other stocks in its peer group (467M), it would need a share price of 25.00. I haven't factored in the dilution we are going to get by financings this year. I'm just trying to illustrate how much upside we have with this one despite the recent doubling.
Dave |
