>> One thing I thought was very interesting is $300 million of either already paid or guaranteed payments. << >> I wish we could get more guidance on what they expect from such deals. <<
Agreed, not much guidance. The annual report and 10-K are less informative than we might like -- for one irksome example, see p. 30 of the 10-K, where the collaboration agreements are described generically as including "one or more of the following sources of revenue" -- research support, milestones, royalties, etc. - so that you can't tell whether AXPH might be due a royalty on an eventual drug, or whatever, from any particular deal.
This reticence, at least about R&D progress, may be tactical. McCamant says: "Keep on the lookout for some unexpected positive events over the next couple of months. We say this because last year, AXPH headed into 1998 with a large list of goals, and did a very good job of meeting them. Yet Wall Street virtually ignored all of this. To combat this apathy, the company has indicated that they are going to say less up front, providing the opportunity for some positive surprises, in an effort to provide Wall Street with some 'unexpected' good news." (MTSL, 4/8/99)
In the absence of much guidance, we can of course infer at least something from the fact that a fistful of big pharmas, including Bayer, MRK, PNU, AMGN, Roche, Parke-Davis (WLA), have thought enough of AXPH's science to enter into more than 20 collaboration agreements of various sorts - nice chart, if a bit sparse, on p. 8 of the annual report. Before putting they put their money down, AXPH showed them a lot more than the shareholders are shown. The underlying premise of this inference is that, although this nonscientist investor is not equipped to judge the quality of the science, I have some clue about it from the swarm of big pharmas willing to put up their money for access to it -- big pharmas' judgment is hardly faultless, but when a bunch of them vote the same way with big money, I pay attention.
In many cases, I'm suspicious of this sort of thought -- in effect, "gee, they've got so many things going, something just has to work out!!" But IMO that inference is likelier to make sense here, where they have so many programs that are so well backed, where they will not run out of cash while we wait, where the indications they are aiming at are big ones (and the cancer program, a recently-announced area of special focus, is unpartnered, see p. 14 of the annual report), where the management shows no inclination to screw the shareholders, and where the stock looks so cheap in relation to the potential rewards of these programs. That's about where I can get by reasoning more or less in the dark about this company.
Given the current stagnation of biotech stocks with no visible prospect of earnings within a couple of years, however, it may well be a good long time before AXPH pops up very much. I hold a small chunk and don't think about it for months at a time, but will probably not buy more until something emerges more clearly.
Also, I think I remember Rick Harmon saying a kind word here and there about the company, although only these two posts come easily to hand : Message 6900819 Message 7030088
Re management, FWIW, Worth magazine two years ago featured (then-Arris) head John Walker as one of the best CEO's in the universe, praising him in particular for making deals that brought in large sums from big pharmas while not giving away any of the company's equity in the process (cf., unfavorably, LGND). Arris' stock was a lot higher before the merger, of course, and not much "shareholder value" has been created lately by Walker and his team.
Also, FWLIW, Jim McCamant has been following AXPH for some time in MTSL, and recommends purchase up to $15 - almost four times the current price. McCamant is generally pretty wary about chasing prices up, and he certainly thinks AXPH is cheap. This contrasts to most of his picks, where the recommended purchase limit is not very far above the current price.
--RCM |
