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Biotech / Medical : VD's Model Portfolio & Discussion Thread
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To: Biomaven who wrote (4610)4/15/1998 1:44:00 AM
From: Vector1  Read Replies (2) of 9719
 
Peter,
GZTC is currently valued at about $180m. They are IMO the industry leader in trangenic production and are likely to establish proof of principal this year. To date, GZTC has produced more than 27 trangenic such proteins. Its lead compound, Antithrombin III is in Phase III and it is likely that GZTC will file its NDA before the end of 1998. In addition the company is a leading Contract Research Organization specializing in preclinical efficacy and safety testing. Fairly valued the CRO alone is worth in excess of $100m. With the completed financing the company has in excess of $20m in cash resulting in the transgenic business being value at around $60m. A huge bargain given the fact that trangenic production is far more robust than current production techniques. This is especially true for blood protiens where the current source has disease risk. Although the purification of the expressed human protiens from the animal protiens remains a scaleup issue the potential is huge.
I have taken a look at the financing and frankly its not as bad as people have made out. First it must be converted within 3 years. Second, until December 20 of this year the conversion price is not less than $14.55 a share. GZTC is obviouly betting on a sucessfull phase III before the end of the year which will drive the stock price in excess of $14. The risk is disappointing phase III results which would destroy the stock price with or without the financing. All in all its an excellent risk reward. I would trim the position if we hit 14+ in the next 90 days.
V1
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