Richard, I took the trouble to find those VRGN posts and was impressed with your analysis, and your profile. I am interested in GZMO, bought a good amount at $2+ and read the posts you referred me to on this thread. I had posted the following elsewhere without getting any response:
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"Here is a misnomer for this (SI-Value Investing) thread - a small biotech "value" stock -- GZMO ($2 1/2):
-This is a stock that tracks (like the old GM class E stock, for
example) the performance of the described business units that are part of the $4 billion market cap parent company GENZ. Company has access to capital and resources of parent company like no other small company its size in its field, so if they make progress will probably not face running out of money. It is not an independent company.
-Current market cap is something like $30 plus million, which is
mispriced if the research initiatives and business make any sense. Probably a lot of selling by institutions who got this stock last fall as a dividend on GENZ helped knock it down from $8 to 2 ($15 12 months
high is wrong), since many such institutions probably can't hold such a stock.
-The parent company in structuring this company retired all the significant outstanding debt related to the sub's businesses by issuing stock at a stated value of $6+.
-The FDA now has a fast track strategy for cancer drugs, which in effect makes cancer research a more attractive field relative to ROI.
-The collaborations with companies and research institutions are top rate. My daughter just got a PhD in cancer research and says they are working where the action is.
I have never considered small biotech companies because all they do is burn money. This is no different in that respect except it seems to cover an awful lot of bases in an important area, with a corporate
structure that seems to offer a good shot at realizing the benefits of its research if successful - and a very low valuation.
Thus, this is the only microcap biotech I have ever seen fit to buy, at current levels. Anyone interested should read the 4/98 S3 at GENZ on EDGAR (very complete) and all the sections of following GENZ
10Q's relating to GZMO. My view is that at this market cap ANY material announced success will deliver a 3-5 bagger.
Additional comments: It seems that the company has no product beyond Phase I trials. Also my daughter attended a seminar where the SAGE gene analysis technology was discussed (2 years ago). Her opinion
is that is was a powerful, expensive research tool at that time (she does not know about the present situation) and mentioned Affymetrix biochips as a possibly better analysis solution. She said SAGE was
too expensive for most academic institutions to afford."
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I am interested in your general view of what I posted and particularly the third from last paragraph. I am trained as an actuary and, although my daughter can help, I can not hope to have much idea of the merits of the small companies products and, as I posted they all burn money - which you might imagine does not appeal to someone with my background. However, it makes sense to have some money in this important sector with a company that has a good chance of going up a lot.
I concluded that the corporate relationship with GENZ gave GZMO a decisive edge and lo and behold out comes this Children's deal which no other little company could have easily gotten by itself. I also like the fact that the CEO is a Harvard MBA and was with Bain Capital
(although, of course, GENZ really runs the company). I have had enough bad results with regular tech stocks run by engineers.
Richard, I would be interested in your view of how important you think the GENZ relationship is and if it justifies selecting this company as a small cap choice in this industry over NO smallcap investment at all (because of my lack of expertise).
Secondly, in view of the public controversy surrounding ENMD's products, I would assume that GZMO/GENZ did a great deal of due diligence before entering the recently announced relationship with Children's. Therefore, I conclude that the paper to be eventually published on what the GZMO CEO called a "next generation" product in a Boston Globe article will read well. Assuming that is the case and from your past experience with this kind of stock, how likely is it that the stock would get a major boost then, beyond what happened this week on the initial announcement, or does the initial news get most of the price action?
Thanks for your help.
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