Here are my views on IPIC. Listen carefully as I will likely give it not more than a couple of "shots". I became interested in this stock as I possible buying opportunity when the news of the recall came out. My views are 100% based on information available on the INTERNET most of which is free and my modest knowledge of statistics.
As a first step, I read through the most recent 10Q and 10K filings as well as browsed at the earliest fillings dating from 1995. These were my key leanings:
1. IPIC does not seem to be a pharmaceutical/biotech company in the sense most of us think about these types of CO's. basically (as stated in their corporate strategy, they concentrate in finding new uses for existing drugs. (e.g., the right isomer of fenfluramine (dexfenfluramine) for which they bought the excluside rigths for the US form Servier, SA, which became Redux; and Citicoline, which they license from s Spanish Co.). From their strategy one sees that they do not put any effort into developing their own drugs and do not have significant in house research capabilities (at least there was no mention of this in the SEC fillings and/or their site). Nothing wrong with this but the pay off from any discovery of a new application for an existing drug is not going to be of the caliper of for example a Reopro from Centocor as a lot of people will be cashing in, including the drug manufacturer.
2. One thin that was of concern in a press release or article in the wsj that originated after the recall, is that management mentioned they "felt glad to have the Redux problem behind" to now concentrate in their exiting pipeline. After the significant effort they put behind getting approval of Redux (an effort that seems to have started in the 80's), and the possibility of the drug having damaged the hearts of many people I do not see how someone can feel glad I would fell very sad and concerned! Particularly considering the apparent irregularities that took place during the FDA approval process (these are discussed in detail in a Fall 96 issue of Time magazine that featured Redux in the front cover).
3. In any event let's now concentrate on the pipeline. First of all do not be deceived by the fact that some of their drugs are in stage three. This is only normal due to the fact that they get a head start by working with drugs that have been used in humans already. Therefore they can skip phase 1 (i.e., don't have to prove that the drug does not kill people), and even phase 2. The drug that seems to be further in their pipeline is Citicoline's use in the treatment of stroke. The main finding of the first clinical study is that there was not statistically significant difference between the people taking the drug and the control group. However, if after the study has been performed ones try to start finding statistical significance; one can for example just look at the results for patients with mid- to severe stroke and then statistical significance shows up. I am therefore skeptical about any markedly different results in coming trials. The bottom line is that Citicoline came out rather weak after the first round. To me the expected present value of cash flows that may result from Citicoline is hardly worth the market cap for this stock.
4. One thing that was very surprising to me is how well the stock held and continues to hold after the recall. Not only a drug that was believed to have a billion dollar market (generating very strong royalties for IPIC) is recalled; in addition, astronomical potential liabilities are created (I am not a lawyer but does any one belive that the Co. that got the drug approved and was cashing in substantial royalties royalties is not liable?), and the price drops from only from $17 to $13. I hope the company is not wasting all the nice cash they have buying their own stock to maintain the price!
The bottom line is that I consider this stock a very especulative game at this price level.
Any ideas on what would be the right price to jump in (if at all?) |
