As always, this is directed to experienced investors following up with their own DD. I start with how I finished the first one of these:

And just to state what should be very clear: These are not great or often even decent companies. They range from “trading sardines” over “might be even cheaper than it is crappy“ to “maybe the sucker liquidates before it goes broke” (RIP Charlie). Don´t ask me if I still hold them in 12 months.

Quick market / biotech overview

What is interesting right now in my opinion is, that we´re seeing a pretty weak tape in smaller or maybe simply more obscure names. That has been going on for roughly 4-6 weeks, but mostly did accelerate the last couple of days. Stuff is still up generally over the last 3 months and I am not finding tons of huge bargains, but there are plenty of decently priced / forgotten stocks out there from a 4-year-bear market.

I´d say if I had to score the current biotech special situations for a risk/reward across the board, I´d give them a 6/10 - with 1 being a very cheap and 10 being an expensive environment.

Cheap call options on strong outcomes are still available, but the number of “free” call options or where you even get paid to take a call-option are clearly limited (or I am too stupid to see them). Consequently, I´m a bit more in cash and hedged than usual (my usual being ~120% long), more like 80 right now. Still own a lot of stuff. Will run through this by current size, but all of that can change in a heartbeat. I won´t list all I own so don´t assume two tickers near each other are similar in size! Also don´t blindly assume that size equals conviction. Some of the smaller positions are actually the ones I like best, but liquidity is insufficient.

The main reason I put this out: If you want to chat any of these, please reach out! I´ll not go (deeply) into the merits / valuations of each, that would be too much. Happy to discuss more deeply in comments / PMs.

Current positions

Japan Basket: I own a lot of net-nets / cheap stocks directly in Japan (mostly 20-50 bps positions) + AJOT + NAVF + ORR (somewhat relevant here). Stole all of them, don´t speak japanese, love the valuations, theme and the risk/reward (being dominated by what I deem to be little risk).

RTW.LN: Biotech fund, simply what I deem to be superior beta exposure and a play on biotech IPOs making a comeback, lifting up their private company exposure. Lots of posts on X by me on this. I trimmed a lot into the biotech rallye.

ORR: L/S Equity ETF by David Orr, heavy Japan Exposure. Bit concerned about the strong AUM growth.

AVR: Medtech company which just initiated a pivotal trial, removed a longstanding financing overhang and had Medtronic buy as much in the financing (5.75$ per share) as the company let them (my guess). Pivotal readout probably 18-24 months out so I might be a bit early, but very confident this will trade 70-200% higher before the readout. Small X post on this, there is a bit more by others. Still off the radar imo as it was an Australian listing for a long time and then IPOed in the US in a horrible time for anything biotech / medtech / pharma.

AVDL: Holding this for the CVR (Very likely 1.5$ in 2028 imo for ~60 cents + funding now). My cost basis is pretty low. Think it is still okayish here, not thinking about this too much.

PTGX: Wrote a lot about it on here and X. Still long, like it a lot more after the recent pullback. Little downside, still strong upside imo. Insiders sold some stock a few days ago, which I think was the official break on current M&A rumours. Stock traded very decent in a shitty tape, gald we have that in the rearview mirror. Oral IL-17 up next, could be huge. 70$/share should be a very hard floor just for Ico + Rusfertide and that is probably quite conservative. Long stock and short puts.

Just in general for sizing - nothing below this is >5% of NAV and almost nothing larger than 4 or 3%.

RPTX.CVR: Just to illustrate how hard I yoloed into this.

QIPT: Cash takeover, HSR expired, trades at a large spread for no reason I think. See my posts on X.

PRTA: Have written about this extensively here and on X. Only incremental news is that BBIO is copying the asset PRTA licensed to NVO so that is a nice validation in my book. Other than that: Moving slow, no totally clear signs in which direction. Where is the damn buyback? Why are there so many folks still employed? Love the numbers, dislike the governance.

TXMD: Own a royalty stream on a portfolio of women´s health drugs about to receive a massively improved label. I would´ve loved to write this up but liquidity is limited on most days. Buyable dip right now, I´d recommend to read my extensive coverage on x (just search “from:anotherbio $TXMD” and sort by latest and then walk your way through). The company owing the royalties values them at ~4 times the market cap.

ETON: Rare disease commercial company. It´s a bit weird of a stock / company, but credible path to strong growth and earnings. Conviction + DD is “borrowed”.

IBIO: Obesity play on the new long-acting “weight stabilizers” a la WVE. I bought this because a lot of great funds bought as much as they were allowed (see my X posts / December filings). I will keep this but own less if it bounces a bit, bought a bit too much. Should be further down the list.

EOLS: Aesthetics company. This just looks cheap if they don´t screw up? Hoping they will not need any dilution. Market will need 1-2 quarters of meeting their targets I think. Some comps (like RVNC) taken out at higher valuations (~double) with way worse profitability.

PRTC.LN: Special sit biotech. London listed sum-of-the-parts (yes I´m actually long lol). X master thread. Waiting for new CEO / Chair and how they finance their IPF company. Tons of value in my opinion, also I´m hoping for a Seaport (their largest holding by value as of today) IPO. Governance mehish. Stuff is moving slow in my opinion, still like the r/r around 130 GBp.

CLSDQ: This is actually not the correct “size spot”, not disclosing that for obvious reasons. Chapter11 play with residual equity value, basically opthalmology tech. I like it a lot, but it also doesn´t really trade anymore. Took a loss on my initial positions, bought basically as much as I was allowed below ~.60$. Check my X posts or write-up on here. This is one is WEIRD but I think r/r is great. Also has a 40% spread often times. No idea if / when liquidity returns, might very well not. Also entering expert markets at some point, so I´m (willingly) stuck in this.

SYBX: Think they had some transactions fall apart, got downlisted as a shell. I think you can earn some $ here on a liquidation, but call option on uplisting (we had some of these surprise re-/uplistings, like SPRB) remains. Timing? Zero clue.

KPRX: Low float clincial ophthalmology company with 2 funded readouts and low market cap, some decent investors. My whole thesis is “will have its day, these things work on average”.

BLTE: Clinical biotech. Darwin, kind of the GOATs recently in anticipating buyouts / strong stock moves bought a lot of this, I followed. Potentially first ever approved treatment in Stargardt Disease. ~50k patients in US.

PMVP: Clinical biotech, will probably have a very niche drug. Stock is very cheap, but outcome will depend a lot on whether they launch themselves (probably a bagel) or sell the company.

GERN: Has a drug on the market with a potentially huge expansion. Think the stock with the drug as-is + net cash end of 2026 is worth somewhere around 0.90$ - 1.20$ a share even if they never grow the drug (probably unlikely but sales are somewhat stable - which is rather negative at this point). Can be worth multiples, owned more lower.

GLPG: European biotech shell. Lots of cash (40+ EUR/share), but weird in that Gilead owns certain rights to all future programs at prices which render a lot of potential programs worthless. Ecor1 involved, Tang as well. Actively trading it, 28-29€ is actually closer to an exit than entry, but I want to see what they´ll do.

SPRO: Owns some rights to Tebipenem, first oral cUTI therapy for which GSK just submitted a marketing application to the FDA (milestones + royalties beginning at ~1B US$ sales). I wrote about this on here and X multiple times. I actually started liking it again ~sub 2.30 US$ / share. They do all the right things. Subleasing, shutting down everything. Think they sell the company or the royalties and then do a reverse merger (latter more likely). What intrigued me again is that GSK was incredibly bullish on it on some calls and there might be ways for this to be worth 4-6$ a share. Might do a more comprehensive write-up or thread on X, but I myself haven´t yet totally made up my mind how much I want to own. Not risk-free, but I think this is down 15 vs up 250, so… yeah. I like it again.

IRWD: Owns royalties on Linzess, and one questionable Phase-3-asset. I do not own any commons, but am short some puts with strike 4 and a lot more with strike 3.

RCKT: Gene therapy, clinical play. Large loser for me last year, think there might be a path forward for them in Danon. But then again, there seems to be bad news for gene therapy every 2 weeks…

VYNE: Reverse Merger with a definitive agreement. Will dividend out their cash. NewCo float will be tiny. Trades around official merger valuation, like the r/r into dividend announcement / actual merger.

INMD: Aesthetics company, cheap, lots of cash, just announced strategic alternatives. Have not made up my mind yet completely but think it´s floored at 15-16 for a while.

IVVD: CDTX (bought by Merck) sympathy play, will have data for a long-acting antibody against Covid (but is not a vaccine). Already has one drug with some sales approved, but the stock is about the upcoming data.

PLMK: SPAC slightly above NAV, about to probably announce a critical minerals something transaction. Hope it peaks. Whatever. Stole it from Capital Valor. Has great SPAC ideas imo.

EVOXU: Basically same as PLMK.

OABI: I own them for their royalty on IMVT-1402 which might very well become a multi-B blockbuster. Next 12-18 months might be insane for IMVT (which I own as well), OABI is my derivative play for that.

SATS: Public company which owns a lot of SpaceX shares. Just a play on SpaceX going public. Origo has some great content on it who is a criminally underfollowed X account.

SLGL: I´m just listing this to highlight how much of an ape I am sometimes. Someone I think rather highly of on my X feed mentioned it in early January as radically underfollowed and a great run-up into its Q4 2026 pivotal data in Gorlin syndrome. I do not know what Gorlin syndrome is. I literally have no idea whether these patient´s heart stops beating or whether their eyes hurt (from reading my bullshit probably).

DAWN: Commercial biotech company. I rabbit-holed into this through the MRSN transaction (bought the CVR bigly but it got pitched to me so I did not write it up). I bought it because I thought the market criminally underestimates the transaction and then I lucked into a great sales guidance for 2026. Still like it.

BIOA: Clinical biotech. The first stock I pitched on here, on its way to a tenbagger. Still own some, actually re-added exposure after their NLRP3-data, which looks way better than what Ventyx presented who are being bought for ~1.2B US$. Recently did a financing and I think that was initiated by investors who wanted to get into the thinly traded stock. Wrote a ton of puts also.

CTMX: I still own some from way earlier but I think I might go flat into the readout and then re-assess after. Downside is brutal, CTMX-history still shady. Maybe I´ll keep 20-50 bps but probably not. But if data keep up with results so far, I´ll ape into this very much and asap after data.

ZURA: Clinical biotech, owning it on and off since.. 1$! Wow! Did include it in a basket during tariff sell-offs. Has an important readout in HS in H2 2026 which is a huge and underserved market. Run-up stock for me, no intention to hold through data (basically almost always the case). As with CTMX, happy to re-enter after data.

ANAB: About to split itself into a RoyaltyCo and BiopharmCo, own it small for the RoyaltyCo mostly, still have some questionmarks and my exposure is mostly from short puts for basically 6 months now. There is some buzz lately around Celiac disease treatments so it trades strong. Have a hard time quantifying upcoming Keytruda LoE as a risk for Jemperli (the drug underlying the royalty stream). Would love to own more. At 30.

KLRS: Long-acting wAMD treatment. Trades weak, even though it did a strong placement recently and you can currently buy it cheaper. Should have large upside if OCUL disappoints.

IKT: Clinical biotech (PAH). I own this on tea leaves. Upcoming GOSS readout will have important ramifications, might even totally implode on this.

NKTX & ANTX: Small positions to monitor these two stocks trading at decent discounts to net cash.

SNSE & NEUP: “Strategic Alternatives”-plays, though they are admittedly more expensive than where I like these historically and the discount to net cash is not huge. Hence small positions.

Stuff I own but have nothing of value to add (also positions I am most likely to flatten in a heartbeat): ABVX TGTX SLNO APLS CGEM IMVT TERN MSFT CAPR IMMX PRPO

Performance lately

I never put out a big “Performance 2025”-post, mostly because I disclose only parts of my positions / tradings. 2025 was insane. I switched accounts (into a corporation with favorable tax treatment) and the “new” account had limited impact from “liberation day” due to that, but still:

If I mash it with the old account in a $-weighted way Sharpe probably drops to 3ish. But 2025 was a total gift - not only that it was crazy good, it also was just a straight line up (after almost dying in the first 3 months, okay). Clinical biotech (BBC) dropped from ~31 in November 2024 to ~14 in April 2025 (65%!!!) and my max drawdown was ~25% - and almost all of that in the last 4 weeks in the crazyness of a “no-bid”-environment.

2026 is not that easy. Slightly outperforming XBI ytd, I´m at ~+4.5% as I write this. That´s basically “nothing happened yet”, one or two unfortunate macro events or biotechs “Providing Updates” in my face and it´s gone. I generally expect 2026 to be a lot harder than 2025, because valuations are not so crazy cheap anymore.

“Stuff still forgotten from a 4-year bear-market” like AVR are representing the most compelling risk/reward right now in my opinion.

More ramblings

What a strange market, man. The one thing that keeps me going through all the madness is, that everybody I respect hates the market in general. It´s probably driven by.. everything? Levered trading by korean housewives, high valuations in general, silver casually 4-folding. As long as everybody is still bearish and disgusted, we have some room to keep going? Still, I am short the market (mostly XBI and IWM) against my longs in decent size, and I gotta say:

What a pain in the ass. Correlation to my stuff sucks, IWM randomly goes up +10 in 3 weeks while my biotech special sits drop or do nothing. It´s just hard to hedge - as in right now in a weird market and for biotech special sits in general. They tend to fall a lot with the market, but they don´t go up with it. Very happy to hear any input into how to reduce beta for a portfolio of SpecialSit ShitCos without experiencing a ton of pain.

Expect that I have a beneficial position in all of these. This is very obviously not financial advice.

I rarely do full update posts on single stocks (I incrementally comment / update on X instead. Or don´t), but I think it´s worth it in this case.

I initially planned on writing a bit more long form in December, but with the year going insanely strong, I re-allocated a lot of time and focus on family, getting worldly stuff done and planning a house to build.

Back to RPTX:

The Gilead transaction

We had great news from Repare, namely Gilead buying RP-3467 for up to 30 million US$. The amazing thing is, that these aren´t 30 million US$ in fairy dust biobucks, but actual hard cash being received completely in the near-term.

We knew from the proxy that RPTX was in advanced discussions. Funnily, just days before the deal, GSK terminated its collaboration with IDYA for a similar asset, on which my assumption, that this asset might surprise the most, was based.

I´m glad it did work out anyway. With the press release, Repare adjusted the expected closing payment from Xeno from 1.82$ to 2.20$ per share, which is where it get´s interesting.

The increase implies about 17.2 million US$ in total, which leaves a lot of room vs. the 30 million US$. Officially, the payment amounts to “$25 million upfront payment, subject to customary holdbacks and adjustments, and an additional $5 million payment upon completion of specified technology transfer activities”.

As the 8-k clears up, RPTX receives 22 million US$ upfront, 3 million US$ goes into a 1-year-holdback and 5 million US$ are paid upon “complete transfer”.

Compare that to the market cap increase of 17.2 million US$ with 12.8 million US$ or 28.3 cents per share “missing” still. The stock traded up 40 cents on the news (2.17$ → 2.57$) which is just a tiny bit more than the pure cash increase of 38 cents. Of course the CVR would have had some implied value for RP-3467 before the news.

Before the Gilead-deal, the CVR was valued at ~16.25 million US$ in total. Given that the BMY collaboration is - at least in my eyes - the cornerstone of the CVR, the implied value for RP-3467 couldn´t have been all that large.

That´s a lot of paragraphs and words for “the stock should be up more”. Let´s put it this way:

If we receive the full 5 million US$ of the second payment and the holdback in 1 year, we are in for 17.7 cents more in payments beyond the 2.20$ per share in closing payments. And then we´re still looking at 4.8 million US$ in expenses for a 30 million US$ deal - I have a hard time not seeing a bit of upside here as well, but let´s just write it off.

Last closing price of 2.57 US$ then implies a valuation of only 21 cents per CVR or 9.28 million US$ if I discount the future Gilead payments a bit:

Great time to revisit my initial dart throwing valuation of all assets EXCEPT BMY:

If you believe any of that, the CVR trades at 70% of a very conservative valuation of all assets - excluding the one that actually matters. Just as a teeny tiny reminder, if you think 2 of the 7 BMY assets are dead already and the remainder are worth 2% of development milestones and 1% of sales milestones, that alone would imply 44 cents a share for the CVR. Excluding all royalties, of course:

Again, for funzies: All milestones from the seven BMY-assets are roughly equal to 38.45$ per CVR if you assume a blended 82.5% pass-through-rate with 22.49$ tied to development and regulatory events before any sales. Excluding royalties, again, of course.

What is it worth now?

It´s still a CVR, so caution and discounts are more than warranted. But in my opinion, 2.66 US$ per share is roughly where the stock should trade just incorporating the Gilead payments versus its earlier trading around 2.17 US$ - which in itself was and is way too cheap anyway in my opinion.

I think it is worth at least and probably way in excess of 3 US$ a share even with very heavy discounts, but I also don´t think it´ll trade that. Which, to be honest, I´m glad about. I like my CVRs either clearly cheap or clearly expensive, which makes the decision to sell/hold/buy around closing easy.

CVRs have several issues (liquidity, taxation, conflict of interest, weak in Ch11 just to name some), so you won´t see me buying something for 40% implied PoS where I think it should be 60%. I´ll be buying that if the market implies 5 or maybe 20% or I am convinced I get valuable call-options for free. And I think RPTX is a very extreme example with the BMY-collab being not priced at all or maybe at a PoS of… 0.10% (yes thats not 10%, it´s 0.10% and that assumes an extremely negative outcome on everything else ex-BMY).

Random stuff I mentioned on X

• Voting agreements for 40% of votes should make the merger sail through smoothly. Still - please press the button, if you own shares.

• The parties to the voting agreement committed to holding their shares. A very positive reflection on the CVR imo.

• With voting on Jan 16 and random Canadian court stuff ~ a week later, closing is expected for late January currently.

Full disclosure, my RPTX position is huge by now. It was large before the Gilead-deal, but you could actually buy very decent chunks of shares below 2.40-2.50$ when the news broke. Do your own DD. I obviously have a clear and large conflict of interest. I love this thing - at the right price. So maybe don´t buy it unlimited like an idiot and assume the same risk/reward holds up if you pay 50% more for the CVR than I do.

I wrote about Repare Therapeutics (RPTX) extensively on X since below 1 US$ a share if you want some background. Here´s my latest valuation post but I´d advise you to search for all my posts where I tagged it (like this). As I realize today, I was pretty lazy back then. Short executive summary before we dive in:

• Repare is being bought by Xeno (backed by Xoma) for probably 1.82 US$ per share in cash and - some of you might have guessed it - a CVR!

• In this CVR included are 3 wholly owned assets - one of them Phase 3-ready -, one partnership with Debiopharm, a 10% stake in a freshly founded company, a non-disclosed program, a R&D credit… and 2.1 B US$ in milestones from Bristol freaking Myers Squibb over a total of 7 programs.

• The CVR is not even trading 1% of these milestones and everything else is for free.

To me, that right now would be a very acceptable end to this article. But I guess you came for endless tables, stupid math and bad jokes.

Btw. I always format headlines etc. so you can easily jump through the article if I reference something mentioned before. On to some housekeeping:

The basics

I´m using 47.498 million shares as a count for fully diluted shares (shares + RSUs + recently granted options after stock tanked) and thereby CVRs. There might be some more options ITM but probably not too much so I think it´ll be pretty accurate.

Furthermore, I´ll be taking the 1.82 US$ per share as a cash-out for granted though I want to highlight that Lava and Essa - two recent Xoma-Deals - had some hick-ups regarding the net cash payment. We will use 1.80$ as the PV of this payment, so in my eyes with the stock at 2.12$, the CVR trades 32 cents (vs 30 cents non-discounted).

What is included in the CVR

Starting with the snippet from the PR:

One interesting nugget to highlight upfront is, that suddenly “AMBER” exists:

Was not disclosed before afaik. It is “a preclinical RBM5 degrader”. Okay. Cool.

Let´s start from the top:

Additional Receivables

The “Additional Receivables” are no joke, details from the CVR agreement:

While not disclosed exactly what that is, (i) is probably one of these payments:

As for (ii), “pre-paid expenses” in total are listed at 3.5 million US$ so that part of the CVR is somewhere between probably 1.5 and 6 million US$ in total. We´re off to a great start with a very small 4x range in our first payment!

The CVR agreement also lists certain “Tax Proceeds” and I am unsure in which bucket they belong, so I´ll be cramping them straight into this one!

→ Moving the range of the bucket to 2 - 6.5 million US$, even ignoring a bit of these. No idea what they are. Neat but immaterial.

Partnership agreements

That is the part that should trigger some salivating. There are 3 partnerships. We will look at two of these quickly and one of them more extensively.

Please remember that there is a tiered participation ratio going down over the years:

DCx Biotherapeutics

DCx is a newly launched company and earlier this year bought large parts of Repare´s platform and even assumed lots of employees. Repare got 4 million US$ in “upfront and near term payments”, 10% of DCx itself as well as undisclosed milestones plus a LSD royalty on eventual products.

There is not much news since then, but I´ll point out that the CEO of DCx is one of the Co-Founders of Zymeworks (Nasdaq:Zyme).

Probably worth somewhere between 0 and 10 million US$ in NPV? I´ll put it at 2 million US$ because reason.

Debiopharm

In July, Repare sold limited rights for Lunresertib to Debiopharm:

It is unclear what the 5 million US$ relate to exactly - this could even be a part of “Additional Receivables”.

We will value the 257 million US$ at a whopping 2% or 5 million US$. Again, this is because reason. Throw your own dice if you feel different.

This feels incredibly small (in light of the 5 million US$ near-term payment), but WEE1 inhibition is littered with failures - so yeah. Pretty materially already with 5 million US$ equaling 11.1 cents (probably an argument to be made this is worth closer to 20 cents). But discount everything on CVRs!

Bristol Myers Squibb - hold my beer

This is where you stop glancing over my bullcrap and start reading. In 2020, Repare and BMS entered into quite the collaboration:

Yes, it says 3B there at the end. This btw. is coming from the technology that is now owned by DCx. The way the deal worked:

BMS could opt into 10 programs, each program then carrying 301 million US$ in milestones. 176 thereof during development / registration and 125 thereof are sales milestones. Roughly 8-12% royalties on top. Remind you, this is per program.

So, how many did BMS opt into? SEVEN! All of this is disclosed pretty poorly, but if you scroll through all the Qs and Ks, one can roughly draft how all of it played out. Sparing you 10 screenshots, BMS opted into 2 programs in 2021, 1 in 2023, probably 2 in 2024 and we know for sure again from 2 in 2025.

The last 2 are incredibly important to me. They clearly show that BMS is still interested in this. As this update shows, they even amended the collaboration to allow for one more target - in June of this year! Remind you that the collaboration initially expired in November 2023 (that means the time they work together in R&D to identify targets / candidates).

I´ll interpret that as a signal that at least one of the programs showed promising early results.

Now let´s look at some negatives: Incredible little money has flown since 2020, think like 2 million US$. With 2 opt-ins 4 years old, one could be quite negative towards these? Did BMS wait for all programs to draft further plans? I´m just irritated that there hasn´t been a 2-5 million US$ payment here or there (think IND, 1st patient dosed etc.). But again, BMS bought into two more programs just this year, so I think there is value here.

I´d also assume that some of the programs might be correlated or even second generation-products to another.

Let´s assume there are 5 active programs (so 2 dead) with 1.5B US$ in milestones remaining (880 development / 625 sales). I also assume that an average of 82.5% of payments are received by CVR holders.

This is the per share value of 5 active programs depending on how you value the milestones:

That means if you think the development milestones should be valued at 3% of face value and sales milestones at 1% of face value, the 5 programs are worth 0.60 US$ per CVR. Dividing these numbers by 5 gets you to a per program-valuation. We ignore all royalties in this exercise.

I think it is incredibly obvious just from what we looked at until now that RPTX should not trade at 2.10 US$.

For funzies: The 7 programs at 82.5% represent a maximum payout of 38.45 US$ per CVR. Even more incredible is the fact that the current CVR valuation is probably covered by all other assets and programs…

Wholly-owned assets

Puh, we need to cover 4 more assets. In my mind, these are mostly call-options but there are some very interesting aspects to talk about here.

To avoid confusion, this will be about all three of these:

The intriguing part is, that RPTX went out of its way to secure 100% of proceeds if they get to sell the assets themselves. The different language in iii and iv is a sign that discussions are ongoing at different stages.

Any upfront proceeds of deals received before closing should simply increase the net cash amount and thereby cash payment at closing.

If a deal is signed after closing (excluding the exemption from iii), CVR holders only receive 50% of future proceeds. Let´s run through the assets!

AMBER

Teased it before, Repare owns a pre-clinical RBM5 degrader. There have been some publications claiming it to be a potentially interesting oncology target. I cannot find any other public companies with a similar approach. I´m slapping 500k US$ on it. Likely a zero.

RP-1664

We saw initial data from that compound in October and I´d put them somewhere between “not completely horrible” and “meh”.

But these patients were heavily pre-treated and 2 of the 3 responses were at the highest dose (here is the poster), so maybe there is something there worth investigating. But my guess would be that this is maybe worth low single digit million US$ and the probability for a big fat zero is right up there. Let´s call it a million bucks.

RP-3467

I don´t even know how to pronounce this thing!

Repare initially guided to data this quarter but scratched that in connection with the deal announcement. Data are probably either really good so they keep them “secret” or they really suck.

Idya has a similar asset in collaboration with GSK:

These are the terms:

Sooo their assets are pretty much at a similar stage. Idya is eligible for 940 million US$ in milestones and decent royalties. Maybe it´s all a farce but my spidey senses are tingling. Repare hides the data AND carves out a special treatment for the payments of just this one asset to go 100% into the CVR if a deal is struck with a party that started negotiations before closing?

There´s something here is my guess and if they can strike a similar deal as Idya, that would probably represent a meaningful double digit NPV of 15-30 million US$?

I´m putting it in at 3 mln US$ because I really know nothing about it (I told you I cannot even pronounce it!!!), but of all the assets that could surprise in a way that moves the CVR strongly, this is my top guess (purely from tea leaves).

Camonsertib

I simply love this screenshot and cannot post it often enough:

Roche moves the asset into Phase 2 in January 2024, pays 40 million US$ to Repare and scratches it 3 weeks later. Apart from a great laugh, we can extract other useful information out of that. No matter what asset you´re talking about, 40 million bucks is quite the milestone to initiate a Phase 2 study. There was a point in time where Roche thought this was a real deal of a drug.

The data of Camo and Lunre in combination on December 12, 2024, actually triggered the sell-off of RPTX and sealed its end as a public company:

I´m not sure if I recall correctly and I am too lazy to check, but I think the response rates highlighted above were a bit exaggerated (included unconfirmed responses). Initially, Repare guided for a Phase 3 trial beginning in H2 of 2025.

I have no real clue about the strength of the data, but I would like to note that December 2024 was already a hard time for biotech and that it is completely possible that the market overreacted and that there is a signal here worth investigating.

If they actually did align with the FDA, maybe there is a credible (and short?) path to potential approval here. Just from the looks of the Roche termination and the market reaction towards Repare´s data, I´m not having my hopes up too much.

But the price tag on this thing can quickly escalate, even if Repare “only” receives 2 million upfront and 75 million US$ on approval? Crazy? Probably. Maybe not.

I´ll err on the side of caution and put in it at 3 million US$, but this is sitting right next to 3467 in terms of surprise potential.

Throwing it together

There is a risk-section still coming, do not throw all of your net worth in the stock just yet!

Once more we´re dealing with the delicate case of a basket of call options, where bear / base / bull makes little sense, because the bull case (“drug works”) is insane but very unlikely, bear case = 0 and base case is the asset stumbles through a couple of development steps and triggers some payments. But which one(s)?

Instead, I´ll try to show that the large collection of random assets besides the BMS-collaboration covers the current cost of the CVR and you´re getting a huge call option for free.

Let´s put the numbers I threw on a dart board together:

Importantly, all of these numbers are basically just the assumptions that all assets die almost worthless and one of these thingies advances a bit before dying as well. If Repare just sells one more asset for 5-10 million US$ upfront + biobucks, these numbers will look ridiculous.

Now, is BMS worth 25 cents a share? 60 cents? 1.50 Dollar? I do not know. But with the stock at 2.13 US$ and the strongest part of this deal at… -3 cents, I guess I will take the plunge.

FWIW I think the CVR should be valued somewhere between 75 cents and 1.2 US$, but I have my doubts the market will get there.

Risks

There are plenty. The most obvious one is that none of the assets ever advance, but I´ll go out on a limb here and think CVR holders will receive at least something. Nevertheless, here´s a nice collection of negatives:

• Who the hell is Xeno Therapeutics (the buyer and debtor of CVR payments)? It seems like it is a small non-profit? What happened here that a 10 year payment stream is dependent of a company that seems to have the financial strength of 5 petrol stations? From what I can tell, Xoma does not guarantee the CVR payments. I actually contacted the company, not sure if I get a response.

• Stock needs 2/3 of votes. The register is actually pretty solid, so I´m not too concerned.

  

• You can find little information on BMS´ side of the programs, but since they´re not in the clinic, that is not too unusual.

• DCx does not seem to be funded completely with the 3 million US$ still missing? Biotech mood got a lot better though, so I´ll be a naive idiot optimist here.

• The track record of “pre-closing” deals is really poor.

• Trading wise the stock might get hurt if a couple of the large holders blow out. Happened to LVTX. But “ability to buy more cheaply” is not really a risk in my eyes. Just saying - if BVF dumps 24%, there will be a candle in the chart!

More thoughts

What a damn great CVR (if not for the debtor…). But I´ll declare Steve Forte the MVP of CVRs right now (until Xeno defaults). High participation rates for 10 years, 100% ownership of certain assets and just what seems like an overall shareholder-friendly design.

Seriously do you remember Kevin Tang? Putting his feet up for 6 months doing nothing, and the “penalty” is he then owns all assets for 100% after getting paid to receive them. CEOs and boards signed this. Biotech, man. Biotech.

I am very long Repare Therapeutics. Do your own DD. I obviously have a conflict of interest. Bought so much I moved my average above 2 US$ (from 1.6 US$).

Will pitch 3 ideas really quick, this will not cover all angles / risks for sure on these. Happy to discuss in comments / on X.

#1 Evoke (EVOK)

It´s just fresh off the press from today and it yields about 17% annualized (10.72$ as I write this) until closing for what seems like a very straightforward deal (11$ in cash with closing this year, I assume December 30. That is 56 days and in line with other recent tender offers.). Your yield (including 10bps fee) depending on price paid:

Some thoughts / caveats:

• 10% of votes are safe (probably Nantahala). There are lots of warrants on this outstanding (just from the 8-k probably some with / some without Black-Scholes-Put) so that might explain the pressure on the stock today and the large volume.

• With the huge turnover today I am not concerned about reaching tender threshold.

• The buyer is private and has a negative recent background which is resolved. There is no financing condition though.

• It is not uncommon for these small mergers to trade at large yields, though this is quite a lot. I´ve had several this year and they all closed without any issues at all.

• Borrow on this is really high (though short interest seems low). Maybe we even get some very juice borrow fees paid to us on top? Not counting on it though.

• Downside in a break is obviously very large. Cannot find any unreasonable MAEs or similar issues. Main risk is probably the somewhat unknown buyer. Size accordingly.

• This probably doesn´t even need HSR expiry due to size?

#2 Avidity (RNA)

Novartis is buying this pre-Phase 3 biotech company. There is no real overlap between the two from what I can tell. I expect this to do exactly what biotech mergers basically always do: close. There is some uncertainty on the timing, which mostly stems from the SpinCo involved. They guide for “H1 2026” and assuming April 15, that is already 171 days. BHVN with a similar structure took 146 days, Inhibrx only 128 days.

The spin is very interesting, as there is not a lot in there as far as I can tell. It´s basically 270 mln US$ in cash and the rights from two collaborations, with BMY and LLY:

Most importantly, both of these collaborations are designed in a way where the partner pays for the R&D-expenses. SpinCo would therefore “only” have to carry G&A mostly. The press release is hinting at attempts to “sell” these assets / rights, presumably to BMY and LLY themselves.

Here is my valuation table for the SpinCo:

I´ll have the audacity to put cash in as a floor. I think it´s worth 2-3 bucks in the end, but there is even a world where there will be no SpinCo at all if they manage to sell it and we simply get a liquidation / dividend / second takeover?

If you assume 99% PoS / Closing Apr 15 / 40$ break the cash portion of the merger is worth 70.3 US$. We´re not even trading that, at 69.84 US$ it yields 6.8% annualized and you get the SpinCo for free. I think it should trade 72$.

I think it is cheap for the following reasons:

• Biotech funds were large in the stock and they want to re-allocate that capital to what many feel is still a cheap biotech landscape instead of stressing over whether this is worth 70, 72 or 73.

• There is uncertainty regarding closing. Maybe the proximity to the annual report is a risk timeline slips ~ a month (would reduce my PV by about 30 cents). But tbh I rather see upside in my timeframe (see BHVN / Inhibrx).

• Can´t think of anything else really, the market tends to sleep on these and does it here as well. Even if SpinCo is only worth 1 US$ this is at least a decent deal.

• Cannot find any strange MAEs or similar issues + highly credible buyer.

#3 Merus (MRUS)

Genmab is buying Merus for 97 US$ a share. Genmab´s stock has reacted very positively to that relatively large acquisition. The “nice” thing here is that break price is not as low as usual in biotech (the one disadvantage of these regularly large premiums).

I assume this closes end of Q4 / early Q1, mostly triangulating dates from this:

January 15 at a purchase price of 94.82$ gets you 2.2% absolute or 11.1% annualized, which is too high in my opinion for this transaction. Possible reasons:

• With all these (partially very large) deals going on right now (AKRO MTSR RNA ATXS AVDL MRUS) arbs are spread thin in my opinion. Also why would you invest in merger arb if PLTR returns 17% a day :-)?

• A danish company acquiring a dutch company with US being involved on the regulatory side surely doesn´t have only fans (badum), but other than potential delays I´m not seeing any substantial risk here on the regulatory side worth mentioning.

I am long all three of these and of course could sell or even short them at any time. Do your own DD.

I´m also just ignoring potential implications from the US shutdown.

This annoying guy flamed me on Xitter…

and he is right and has a valid point (and also ignored 70% of the article, but still). Establishing a “base case” for a basket of OTM call options (like PRTAs assets) doesn´t make sense - the bear case will have them at 0 and the (true) bull case will be crazy high - and an actual base case doesn´t exist. We´ll look more closely at sensitivities and what moves the NPV of the stock.

What has happened so far?

Apart from the stock drifting up, the company visited an investor conference (strange in their situation) and re-iterated that they´re not going to invest in their own programs. They also seem to be saying that in private talks, but I only know that from other sources. Still, the direction seems right (towards maximizing shareholder value).

Apart from that, we heard from Roche regarding the upcoming Phase 3-program for prasinezumab:

They intend to enroll 900 patients (vs. 586 in the Ph2b and 316 in the Ph2), so it is indeed a game of scaling up to make the somewhat benign treatment effect seen so far statistically significant. Enrollment will focus on the (very large and pre-specified) subgroup from PADOVA that hit “stat sig” (patients treated with levodopa).

The timeline is obviously and unsurprisingly long. If you´re long the stock, you should be very aware of that fact!

Also PRX-012 is as dead as they come. Nobody cared about that and the stock worked through that pretty quickly. What I would note as slightly negative though is, that the company previously talked about a “placebo-like safety” they saw initially regarding the compound and then safety was absolutely horrible. Good they´ve stopped their own developments... They intend to partner the asset including a next-gen compound, I´m marking it as a zero (had it at a whopping 5 million US$ in the base case).

Other than that, Novo will present Ph2 data on Coramitug at AHA 2025. Late-breaker on Nov 10 at 2pm CT.

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The BMS collaboration - a closer look

Just upfront: I won´t even start to claim I know anything here really. This is a tea leaves- and vibes-based valuation (which works way better than it sounds! Mostly. Sometimes).

The origins of the collaboration dates back to 2018, where Celgene and Prothena entered into a global collaboration. Bristol inherited it through their acquisition of Celgene. I tend to be skeptical of these “inherited” collaborations, but BMS has now kept going for 6 years so we can probably put these reservations to rest.

The collaboration has “ended” in the sense that there will not be any new assets subject to it, so we can limit our DD to the two existing assets: PRX005 and PRX019.

PRX019 is a wonderful asset, since nothing is disclosed so for once I know as much as a PhD about this Phase 1-asset! The milestones / payments are identical though to PRX005, so keep this in mind as we walk through the latter.

PRX005 - Phase 2 AD-asset

PRX005 (“designed to be a best-in-class anti-tau antibody, specifically targets an area within the microtubule binding region (MTBR) of tau for the potential treatment of Alzheimer’s disease”) has a clean history so far. In 2021, BMS opted into the program for 80 million US$. After the Phase 1-program concluded, BMS opted in again in 2023 for a further payment of 55 million US$ and subsequently all development obligations transferred to the Big Pharma company. BMS calls it BMS-986446.

If I trust ChatGPT, similar approaches have been tried with very limited success (Etalanetug for example). BMS is surely aware of that and PRX005 is supposed to target more thingies so that it works better. Maybe yes, maybe no, whatever. I DID promise you tea leaves though!

As a matter of fact, BMS did enroll 310 patients into the placebo-controlled Phase 2-study (Clinicaltrials) with final data expected in 2027.

The asset obtained Fast Track Designation just recently. While that is in no way any real reflection of value, it shows that at least someone within BMS actively cares enough to fill out some forms and issue a PR. Yay?

Much more interesting to me: On the same date, BMS posted an update on another study.

They compared the PK of the IV-version (the one in Ph2) to a subcutaneous (SC) version. That study was initiated only early this year:

At the time of initiation, the IV-study was already enrolling for ~one year. So while I guess BMS is blinded to the results, they must have seen compelling blinded data to invest even more in the product? The simple fact they doubled down on the asset in some capacity is at the very least somewhat encouraging.

Going back a bit further (September 2023), this piqued my interest:

Maybe I´m reading way too much into it, but “supports rapidly moving into Phase 2” is a clear indication of strong Phase 1 data, no?

Then we have other changes that are a bit harder to analyze:

Apart from changing the primary endpoint from a patient-reported outcome to a measure of tau deposition, the enrollment was cut from 475 estimated to 310 final. That happened in May 2025, right around where they initiated the SC-study.

My thesis(remember:idiot!): The differences in tau deposition are so pronounced, that they see them clearly in the data so they made this the primary endpoint. They are also large enough to warrant checking a maybe less potent SC-version since the change in brain tau deposition in the IV-version is larger than what they predicted they need to show efficacy (IF the biological thesis of “lower tau → less AD-progression” holds).

Alternatively, the data in the (blinded) data in the Dementia Scale is just horrible and they are gambling on the biomarker.

Still, it should be noted, that the FDA could approve an AD-drug based on biomarker data “reasonable likely to predict clinical benefit” (see aducanumab). Does tau-reduction qualify? No idea! Probably not.

Right around when they initiated the SC-study, they also opted into the second asset, PRX019. All of this shows me at least the following:

• PRX005 is treated at least as a promising approach within BMS and not a dead horse or they would not invest even more into it.

• BMS values the partnership and the assets coming from Prothena. Opting into PRX019 must be - at a minimum to a small degree - a reflection of positive experiences with PRX005, no?

Sadly, we have little insight into the economics of the program(s):

We can be quite confident that the “final” opt-in into PRX019 will trigger 55 million US$ (as did PRX005). The opt-in into PRX005 happened on mostly PK/PD-data, so I would assume the hurdle for PRX019 is quite low but since we know nothing about this… Well, what can I say?

Apart from that, “high teens” royalties are above average and I would expect the majority of the remaining milestone payments to be tied to sales milestones, simply because that is the way it usually happens.

On the negative side, the slide cites “regulatory and sales milestones” which also means there are no development milestones left apart from the 50 million US$ opt-in for PRX019.

I guess we can assume a 75-150 million US$ payment for US-approval with the remainder being tied to sales. That means readout still matters as they shift the probabilities on hundreds of millions of US$, but the timing being so far out and the indications being AD and “neuro”, we are probably and sadly talking probabilities at the lower end of what we are used to - as neuro tends to be a graveyard.

Before throwing some darts at numbers, let´s wrap up PRX019 quickly.

PRX019 - ignorance is bliss

The Phase 1-trial for PRX019 is supposed to be completed in 2026:

At that time, BMS will decide whether to opt-in or not. From this slide we can also infer that the enrollment milestone for Coramitug is 55 million US$ btw (since we know with high confidence that PRX019 triggers 50 million US$).

After that, the economics tied to PRX019 seem to be identical to those of PRX005 (no other payments until approval).

Crunching the numbers

As I teased in the intro, my usual split into Bear/Base/Bull doesn´t really make sense here, since Bear is clearly zero, Base still close to zero and Bull hundreds of millions of US$ (due to high royalties). Trading PRTA is basically trading cash (or the portion not being pissed away) + a basket of call options and we´ll have to look at potential values a bit closer. As much as I hate to do so, we´ll engage in the dark arts of a DCF - so let´s change numbers in Excel until we like the outcome!

Just to make it clear: We will use a horribly simple model. It´s not about the numbers, it´s about the sensitivities! There are dozens of cases to consider. The drug being approved and commercially successful are two distinct cases - and “successful” in AD can mean 1B or 5B or 10B in peak sales!

Consider this scenario:

Drug approved in 2031, efficacy kind of convincing but drug is not used a ton. Probability of approval 15%. I guess the main takeaway here is: 1.77B US$ in payments to PRTA are worth only 50 million US$ today with a discount rate of 10% under these assumptions.

Let´s assume Ph2 data is decent and we up the probability of approval to 50%:

So while further data will not trigger payments, they will increase the NPV - potentially dramatically. Also remember that this NPV then increases 10% a year. Here´s the sensitivity for that scenario:

These still are just variations of base cases, I put zero thought in the royalty rates and basically just slapped random sales numbers and milestones into Excel.

A true (or truly retarded?) bull case would look closer to this I think:

Again, super lazy, didn´t even change most of the numbers. Even with these increased probabilities and sales, it is important to remember that my NPV here is only 12.9% of total payments to Prothena, given the long timeframe to potential payments (the wonders of compounding work in both ways…).

This exercise seems worthless on the one hand, but this will give you a feeling to trade data for this asset. If data are somewhat okayish and the stock is up 6$ - that´s probably too much (as one example).

This does not help us to put a single number on the asset and you can probably see more clearly now just from this example, how PRTA can move on small changes in (perceived) probabilities. This is even more import for Prasinezumab.

PRX019 looks very similar, though it is actually and surprisingly worth more imo, since the 50 millions US$ from the opt-in is still outstanding and the payment is near term. Slapping 50% PoS on that payment in 2026 adds ~23 million US$ or 0.43$ per share in NPV.

As I type this, I realize how I put myself in an even harder to position to give readers a “valuation table” with 3 easy numbers. Let´s move on to the other assets and I hope I get a decent idea of how to display these potential NPVs in the meantime :).

Updating the view on valuation

So while we have looked more closely at the BMS collab, let´s update our view on Coramitug (Novo) and - most importantly - Prasinezumab (Roche).

Prasinezumab - sensitivities

Maybe one more thing on the qualitative side of things. Roche´s tone regarding Prasinezumab has gotten stronger in my eyes. Read these quotes (yes, tiresome reading work! On that note, it´s quite interesting to me that I often link sources or further readings and substack tells me … nobody ever clicks these. You´re really just taking my ramblings at face value, aren´t you!)

There´s still a note of “Well there´s nothing better out so we might as well try” in there, but in my opinion they are sounding more bullish. And - as is customary - they will probably proceed to pump the study as we approach the readout. In 2029.

Notwithstanding, “open label”, “external control” and “sat sig in subgroup” is still a level of red flags rivaling a military parade in the Sowjet Union. I am interested in this because the market prices an incredibly low PoS, not because I am convinced it works.

My guess is still, they might make it work statistically and there will be a large debate over clinical significance. Given the high unmet need in PD, this will then sell anyway.

Nevertheless, I still think if you want to condense the PRTA case to a single sentence, it is still and more than ever:

If Prasinezumab were to read out tomorrow with a potential 2-3 billion US$ valuation on success, will we trade at an EV of ~290 million US$ (like today at 10.48 US$)? Hell no is my guess.

That is with ~15-20% implied PoS being extremely low given Roche´s statements and completely ignoring all other assets! That says little about where the stock trades in 2026 or 2027, but I think it should be a mental anchor to the stock.

With me pumping my long out of the way - more random numbers in Excel, let´s do this! Remember, Roche guides for “> 3B CHF” in unadjusted sales which equals 3.74B US$.

I´m modeling for 12 years of exclusivity. These are my assumptions for the royalty rate:

Let´s make this one easier: We´ll look at unadjusted numbers and just go down from there:

This is finest sell-side BS, I´m just putting management guidance in there and making some assumptions.

There is one very interesting angle on this. If I change the target date for discounting to June 30, 2029, the undiscounted value rises to 44.66$ per share - so whatever value you use today, it´ll be ~50% higher by readout time. Adjusting for PoS, our table looks like this:

I´d say all of this turned out slightly lower than expected without the DCF, but these are still large numbers (ex cash, buyback and all other assets!). If we go back to my assumption from the first article of ~276 million US$ of capital available for shareholders (up for debate - what are all these employees still doing at PRTA?) and substract that from the market cap at 10.48 US$ a share, PRTA is valued at 5.35$ per share ex-cash or at 17% PoS for Prasinezumab ignoring all other clinical programs and partnerships (the 50 million US$ from Novo for Coramitug-enrollment are included in the 276 million US$ of cash though).

I completely ignored the co-promote option the company has as its economics are completely unknown. They are clearly not a 50/50-share in my opinion (there was a 30/70 split PRTA could´ve opted in to but passed) so I have zero clue what that option includes and what it might be worth.

Coramitug - sensitivities

Still not done! Let´s roll through Coramitug in ATTR-CM. We don´t know much anyway, so I can continue making up numbers in Excel. Our vast knowledge regarding this program:

We do know that 50 million US$ will be paid as an enrollment milestone and PRTA management guides for 2026. I also remember them saying that there are no other pre-approval or pre-BLA payments, so this basically gets approved and there is more cash or it is not approved and it´s a zero. I will again assume the vast majority of the then remaining 1.080B US$ will be tied to sales milestones rather than approvals / first sales. The Phase 3-study started enrolling (Clinicaltrials), primary completion is mid-2029. Yay.

Coramitug is investigated on top of standard of care, it´s not a replacement for Attruby/Amvuttra/Vyndaqel. That might actually be enticing, especially when Vyndaqel goes generic. The issue I see is that the other drugs are already working pretty decent and are pushing mortality rates close to healthy peers, so how much room for improvement is there really? Will people desire an IV-infusion every 4 weeks? I think these are valid concerns but I am also sure that Novo knows a lot more about this than I do, so I don´t think they initiate a 4-year-study on ~1,230 patients (ALNY had 655 in their Ph3 for reference) for..funzies? The large patient number as well as the large timeframe makes sure that this is powered even for relatively small changes in CV-events / mortality.

I took out the 50 million US$ enrollment payment (as it is included in my net cash - this is pretty much extremely likely I guess, probably not even full enrollment required given the guidance from PRTA management for payment in 2026?). I only allocated 860 of 1,080 million US$ in milestones in total. Whatever, here we go:

PoS for approval is roughly the average for cardiovascular Phase 3-trials and I modeled this as a small add-on-therapy in a then-probably 14-20B US$ market. I´m probably too bearish on this, but then again - we have seen no data. Phase 2-data in a week or two, maybe we will know a lot more by then. Either way probably not a huge mover. I took down the probabilities here for the milestones beyond approval (which makes sense), but for our PoS sensitivity I will set them all equal:

These also roll up 10% a year and will be ~50% higher by mid-2029. If my math from above holds (276 million US$ net cash), this covers 50% of today´s EV at 40% Pos…

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Putting it together…again

Oh I also just killed PRX123 from my model as did PRTA from their slides, PRX012 is also removed from the model. Just keeping it in the back of my head, maybe they get some biobucks or a couple millions, don´t care. We move away from the total randomness of Bear/Base/Bull to... this:

Remember that all these values (except cash) would roll up by ~10% a year (until the program gets killed, that is ;-). There is still no sense in interpreting every column as “one case”, but I think this shows way better what drives the outcome, what doesn´t and where we stand today.

We have completely ignored the buyback until now. Let´s repeat that fun exercise. Unfortunately it takes ages to implement - Prothena will only have the required shareholder approval in hand by November, 19.

Chatter is, the buyback will be only around 100-150 million US$. We´ll still use 250 as that is more fun and there is a lot of time until 2029.

Some interesting observations: My prior bullcase after buyback (at a lower price) was sitting at 51$ per share and I said “it isn´t even a real bull case”. I think this table highlights what I meant - it´s a blended ~55% PoS.

It is probably way too naive to assume the company will be able to buy 43% of outstanding shares at the current price - this exercise is there to quantify the possible effect of the buyback and the truth will probably sit somewhere in the middle.

If Coramitug and Prasi survive until 2028/2029, we will see one or more frenzies on the stock, I´m pretty sure. Remember - all values will be 50% higher by then with the same assumptions.

Risks to the methodology and the stock

Look, this is obviously bullshit². Even now, I compressed multiple outcomes into a single case per asset and I don´t even begin to capture the variety of scenarios for each asset. I think it´s a lot better than nothing (or Piper´s report!), but I am also pretty sure I´ll be on the floor laughing when I revisit this in 2035.

The biggest unknown for me is still management + strategy (and thereby mostly the net cash part of my valuation). Why are all these employees still here? It looks to me like the wind-down is real and when they were at Cantor in September, they said great things only. But when you e-mail them, there is no answer at all or you´ll get a “we will consider your input” (aka “GFY”). I just wish they would truly commit to shareholder value in writing publicly.

Return the cash, pass through royalties and milestones to shareholders and when there is a compelling offer to sell an asset or royalty-stream, take it. It is EXCRUCIATING how incredibly obvious the most value-creating path is and how management is dancing around that fact. Well, we have earnings coming up and hopefully we will get some good news.

If you take anything in here as financial advice, there is no one to blame but yourself. I am very long PRTA.

More random thoughts

• PRTA is not yet in a catalyst desert (buyback, final “strategy”, asset sales, BMS decision on PRX019 in 2026, PRX005 data in 2027) but there will be slow times certainly!

• I still think the stock trades on the cheap side of things, but it´s pretty sure not trading 25$ next year. I guess? Wild times.

• All the puts (mostly december remaining) I sold are pretty much on the brink of worthlessness or expired already. I don´t think there is much management can do that I would not want to buy this thing below 7.5$, but one should still analyze how the risk/reward looks like on sold puts when they trade around a nickel +/-.

• I continue to sell OTM call options on a part of my exposure (think 20-40%) when the stock rallies, currently only have 12.5 strikes on.

• I sold some commons just to rebalance to the original weight when I bought it. That also makes me able to act when the stock has a few bad weeks for whatever reason. Ain´t nobody going broke taking profits.

• The stock is still my largest single name long, though I obviously expect less from it as it goes up. But 13-16 US$ over the coming quarters depending on how the dominoes fall? Why not. Please don´t assume this is still the case when you read this 3 weeks after publishing.

This is intended as a pure, quick update with little explanations, so little reason to read this if you´re new to this adventure.

Protagonist (PTGX)

There were rumors from the WSJ, that JNJ is about to acquire PTGX. Later, we heard from Betaville, that it´s “just” 75$ a share but that´s probably just the Icotrokinra royalty-stream? Here´s my write-up from just September:

Couple of thoughts:

• A core part of my thesis is that the royalty-assets are worth substantially more in the hands of someone else (especially JNJ / TAK but also royalty companies).

• I am also still convinced that a single buyer of the company is very unlikely, as the asymmetry of all these assets might make it very hard to agree on a price.

• The market (and I) expected the deal to be announced already, so the stock pulled back. I don´t know when the market would consider the deal actually broken, but I don´t think there will be such a thing. It just makes sense that JNJ acquires the royalties at some point (though that might just end up being 2028 or whatever?).

• The hit rate of the WSJ is incredibly high as Biotenic points out. Fair counterpoint is, that it is soon the deal with the longest timeline from rumor to (potential) announcement. Hit rate for WSJ is actually closer to 100% - the offer for CYTK was later 8-k-ed so it was real.

I am still long and even bought some more below 75$, as I think the market is overly concerned that the deal has not yet been announced. Let´s see. Would love a cash-out with a NewCo (BHVN-style).

Lava (LVTX)

Lots of value shifted around at Lava. I am dealing with this in an incredibly lazy way, I just don´t care. This CVR is a moonshot-opportunity of a lifetime. I would love to somehow own this for free or close to (via net cash / asset sales), but the core thesis remains the same: One of the assets advances meaningfully and this will pay a shit-ton. Or not.

Also this (link to X post):

Umm… great?

Also please vote so this thing closes, thank you.

Spero (SPRO)

Rallied on a data announcement which was basically known. Actually shorted the stock meaningfully on the pop, I am back to owning just a little bit as a Covered Call (2.5 C). Would happily refill around / sub 2$, not interested in mid to high 2s. Rationale should be apparent from my last update:

Moar tickers and stuff!

Mentioned these in my “ticker rapid fire” or on X, quick rundown! Not complete.

• CTMX is up more than 50%. Slowly trimming, still long meaningfully into Q1. Don´t care about the Q4 data update and I don´t think anybody does.

• YORK now MCGA took the loss. Might get back in anytime if I see more crypto strength.

• PRTA still my largest “single name plain long” (means excluding CVR stuff / funds / hedges). Will update in a larger, separate post.

• HLVX CVR paid big time. Awesome. EDIT: Confused it with ITOS, scratch that.

• RTW.LN everything working for them right now, rotated tons of biotech exposure into the fund. Still large discount to NAV. Very long. Especially loved the financing on Kailera, provides a meaningful validation of their private book.

• FGEN exited. Worked great, was wrong though on post-M&A-net cash.

• BIOA whoop whoop. My first pitch on here now >+100% - not too shabby for a boring cash shell. Still long some.

• IVVD working for whatever reason, just a “MAGA stock” for me.

• VYNE sold in high 30s for a decent profit, was all I was looking for.

• AQST out with a profit, great play on the financing, not interested in digging in and RTW.LN holds this as well.

• CELC huge win on data from ROG (just luck), took the money for now. Might get back in.

• NERV holy camoly, thank you very much.

• BBOT out. Didn´t really know what I owned and made 25-35% on it anyway, enough for me. Will try to get current on it before they release data, might provide an opportunity as an underfollowed stock.

• ETNB yay I lucked into a buyout. Sized it up materially for the CVR. Bit tricky but like it at low implied odds (30% or less).

• Also sold: AKRO (before the buyout after ETNB proxy, of course!), RVMD (on the spike, looking to get back in), SRRK (want to get back in probably), CRNX, CGON (in low 30s since me = idiot).

I don´t want to introduce new stuff here, did some quick mentions on X (ANAB Short Puts, AVDL CVR). Will put out more comments / deeper stuff as well as a larger update on PRTA (looking more closely at non-core-assets and providing a more meaningful “valuation”) over the coming days.

In general I despise the bullshit market. Pardoning of fraudsters, crypto pumping, insider dealings, favorable PIPEs to Trump-cronies, announcing and pulling back major trade wars on truth social within 48 hours - everything has become non-sense and a charade. The extent of all of this has gotten so insane that we just stopped wondering at all and what would bring down any government official in the EU within 24 hours has become widespread norm in the US. I try to play as sensible as possible without giving in to the bullcrap, but also without going full retard on hedges. Still too many bears around.

Pretty challenging environment for biotech special sits, as your stocks tend to go down with ARKK but not up with it. That´s pretty much the basis for why biotech can be so insanely profitable, but it is still annoying in times like this.

Also celebrated 1 year of trading full-time on Oct 1 and I think I might just annoy you with my reflections on that soon!

Got a bit rambly here at the end, but you get what you pay for :)

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Lava Therapeutics (LVTX) is one of the rare CVRs where you have the opportunity to receive a cash-flow-stream from a partnership or royalties from a drug directly. Just that fact combined with milestones that are almost 100 times as large as the CVR price make this “investment” very special.

Let´s dive right into the quick check:

• LVTX shareholders are offered 1.16$ + up to 0.08$ depending on net cash + a CVR by “distressed buyer/liquidator” Xoma.

• While there are no headline numbers visible, two of the partnered programs provide for milestones for up to 23.89$ per CVR (yes, no typo) net of Xoma´s stake versus a trading price of 25 to 33 Cents(!).

• Royalties, one unpartnered phase-1-asset and a net cash sweep comes on top of that.

• While there is no real “safety net” (I assume?) in this CVR and you are properly risking your capital, a trading price of only ~1-1.3% of face value looks at least incredibly asymmetric and …hot to me.

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Facts about the CVR

This is actually a fun part, because the CVR is designed so well, that I have to resort to stupid puns about lava and fire instead of shaming biotech executives for designing the CVR in a way that looks like begging to get screwed!

The CVR has a term of 10 years(!) and gives holders the right to receive:

• 100% of the amount by which net cash exceeds the target as of the final determination (~90 days after closing);

• 100% of net proceeds from any asset sales prior to closing;

• 75% of net proceeds from existing partnerships or newly entered asset sales for the CVR products.

There are two main assets here: A partnership with Pfizer (initially entered into with Seagen) and one with JNJ. On top, there is LAVA-1266. It was recently in a phase-1-study which was aborted, but we don´t know the reasons behind that completely. On top, everything else should be included (potential pre-clinical candidates we know nothing about or the platform / technology).

It´s quite the bundle of assets. They are - I think(!) - not totally uncorrelated, as they all rely on partially similar technology, but the programs are targeting different indications and clinical targets.

Before we dive into the assets, let´s take a look at pricing!

The deal with Xoma

The acquisition was announced on August 4 and has some unusual elements. Shareholders will get at least 1.16 US$ from Xoma. Depending on net cash at closing, there is an “Additional net cash target” of a further 8 US-cents to be gained. So we already have no clue how much we will be actually paying for the CVR - great.

All of this is in addition to the net cash sweep in the CVR. For this analysis, we just assume a stock price of 1.50 US$ and a cash takeover of 1.20 US$, though I personally clearly see room for the upper end to pay and then some.

30 Cents a CVR implies a valuation of roughly 8 million US$ for the CVR. Regarding closing, this is a weird dutch merger requiring 80% of votes (potentially reduced to 75%). The company had a decent base of large shareholders before the announcement and a lot of shares were turned over after they announced “strategic alternatives”, so I assume this hurdle will be met. 60.7% of shares in decent hands able to submit a proxy:

Versant sold after the merger announcement, though I suspect the buyers will be able to push a button or Versant will do it themselves (they sold after the record date for the vote).

The Extraordinary General Meeting of LVTX-holders will be held on Sep 30 and the tender offer expires Oct 3. I have no idea on additional requirements, I just assume this will close in H1 of October. Did not do a lot of work on that (read:no work). Enough with that, let´s take a look at potential payments.

The CVR-Assets

The assets from Lava are so called “bispecific gamma delta T cell engagers”. You know me to be upfront when I don´t know stuff and there is probably not one word in that sentence I can describe even half as decent as the shittiest junior pharma analyst on Wall St. I asked ChatGPT to look for some peers, but apparently there aren´t any. Adicet is following a somewhat similar technology in immunology, but it is trading like it is definitely worthless.

So maybe that is already all there is to it. Doesn´t work, everybody knows it already except the German idiot and he even wastes time writing an article! But well, the idiot has some counterpoints. Let´s go.

#1 Pfizer - the hot stuff!

In September of 2022, Seagen and Lava entered into this collaboration. Today´s state:

A couple qualitative things of note: Pfizer announced to acquire Seagen on Mar13 and closed on Dec14 in 2023. So when Pfizer advanced the asset in March 2024 (triggering a 7 mln US$ milestone), it was actually their decision and (probably?) not some guys´ at Seagen who didn´t care anymore since their job is about to end anyway.

Pfizer also highlighted the asset at their oncology-day on March 1, 2024:

It is currently in Phase-1-development. According to clinicaltrials, recruiting is ongoing and Pfizer plans to enroll 260 patients (sic!). It´s hard to say from the outside when there will be a decision on the “final dose” and initial data on these, which could trigger advancing the asset. I also don´t really care.

Lava owns ~643 million US$ in milestones remaining and very decent royalties of low teens to high mid-teens (11-17%?). They received 7 million US$ for the Phase-1-initiation.

I could now dream up a milestone-structure, throw darts for random probabilities and there probably would be no way I did not end up at a ridiculous value either way. But I tend to think in way simpler terms here. There is 2 options:

1. Another milestone is triggered and the CVR probably paid for - or not!

2. No further progress is made and it´s a zero.

Somehow, every further step seems like over-analyzing this situation. The sheer amount of milestones obviously dwarfs the CVR cost. One more aspect to make you grasp the potential economic impact the parties think this program can have:

Lava has the option to buy up the royalties to “low teen to high teens” for 35 million US$ around the time of “early clinical data”, which is maybe a bump of 1 or 2% in absolute royalties here? What does it tell you, if 1 or 2 percentage points of royalties years from approval and actual revenues are worth 35 million US$? Compare just this fact this to the current trading price of 8 million US$ for the CVR.

I think it is reasonable to assume that about 25-35% of the milestones are tied to development and regulatory progress, which leaves quite the possible return even if the program fails at a later stage. Given the size and scope of the phase 1 trial, there is also a small probability that CVR-holders will receive payment irrespective of success. I would expect the next payment to be upon phase 2 initiation, but it´s not like “in-between-milestones” are unheard of.

Remember: 25% of payments go to Xoma.

The average probability of a random asset to go from Phase 1 to Phase 2 is roughly 50%.

#2 JNJ - the small brother

This collaboration goes way back to 2020 and LVTX/JNJ have been working on the program for quite a while:

What I think is the most interesting part, is that JNJ decided to file an IND in October 2024. That means both important programs have received an active “go-decision” over the past 18 months and both are indeed active. Just in September, the clinicaltrials-study (r/r AML) was updated to include more locations for recruiting.

Payments so far have been benign (still, they would´ve almost covered the CVR!) and from the 10-K, we know that 195 million US$ in milestones are outstanding (maybe a touch less if the already paid amounts are included but whatever). Still, Lava received 5 million US$ for the IND filing. This comes down to the very same assumptions as with Pfizer: If they advance one more step, the CVR is probably roughly paid for.

And - again - there is a non-zero probability that there will be another payment before a Phase 2 initiation-decision.

#3 LAVA-1266 and others

Not too much to say here, they abandoned the asset mid-phase-1 when they announced the Xoma-transaction. There aren´t any indications that this has happened due to disappointing data, but it is probably safe to assume that this played at least somewhat of a role.

What I think is an interesting frame is that Lava successfully managed to enter into meaningful partnerships with large pharmaceutical companies. So we do have Lava-1266, “the platform” and potentially undisclosed preclinical assets in this bucket.

I´m not putting any hard value on to this. But we can see very often in CVRs or wind-downs, that these “remaining assets” can be worth surprisingly large amounts. One recent example was Repare Therapeutics (My twitter-thread and a write-up from Biotenic), where they received 4 million US$ + a 10%-stake by selling their discovery platform. These kind of small transactions can have a dramatic impact on this CVR - remember we are talking a value of 8 million US$ at current prices.

I´ll leave it to you to roll the dice on this or blindly throw darts, but I guess we will see more than ashes from this bucket :)

#4 Net cash sweep

I don´t know, this really seems like it involves a lot of guessing around. What I don´t really get is the double-dip on net cash with the “Additional net cash” and the “net cash sweep”, but I guess it speeds up proceeds to shareholders if net cash surprises to the upside.

In my opinion the largest unknowns here are winddown costs for 1266. They only burned around 7.2 million US$ in Q2 (still including restructuring charges) and I honestly think that net cash could surprise to the upside. With 2 million US$ burn per month, a closing of mid-october, 5 million US$ liquidation payment to Xoma and 3 million US$ for severances / whatnot, net cash at closing is 1.35 US$ per share. If burn were to stay at a high rate of 7.5 / quarter I´m seeing 1.28 US$ per share.

Not sure what I´m missing here. Maybe the winddown of 1266 is expensive (but more expensive than carrying out the study? How?) but just from doing some rough maths, I am actually expecting the merger to pay 1.24$ in a first step and am reasonably confident that we will receive a touch more afterwards, irrespective of asset sales. At 1.3 US$ in net cash, the CVR valuation drops to 5.25 million US$.

Putting it together

I will spare us all the insanity of guessing whether the studies have a 2, 5 or 40% chance to progress,. I do think that it is reasonable likely that the CVR is actually trading at only 5-6 million US$ (given some net cash payouts) and there is a somewhat decent chance that just the assets outside the agreement might cover a part of the CVR, before we even get to the large programs - especially Pfizer.

This one also is the big price for sure. If (BIG if) the asset is successful, this could easily pay 3 to 10 times today´s market cap (not CVR price) - in addition to receiving royalties (every ~100 million US$ in sales probably equal to today´s CVR valuation with a conservative stance on net cash).

Now, is the probability of that happening 3%?7% (about the historical average for a phase 1 program)?15%? I do not know. But I think I laid out clearly why the CVR is probably too cheap. I can´t really tell you where it should be priced. Though I carry the opinion that you should probably not be able to come up with a somewhat easy way to receive the full CVR-price in net cash and non-core-assets - and that is still the case here.

I don´t know how it´ll play out and it´s not really a mostly risk-free CVR as I thought KRON to be. But the potential payoff is insane and the fact you only need 1 asset to advance 1 step further for an IRR of zeroish - those two together don´t make much sense in my head.

Unless the stock goes crazy (where I might sell some), it´ll be my largest CVR-investment to date.

Just think about for one moment where the stock would trade, if the CVR wasn´t some legal mumbo-jumbo, but would state “Up to 23.89 US$ per CVR in milestones from Pfizer and JNJ + potential royalties”. Would it trade at 30 cents? I highly doubt that.

Disclaimer: Nothing on this blog is investing or financial advice, do your own DD. I do have a large beneficial long position in LVTX as of writing.

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More thoughts and risks

• Hopefully Xoma doesn´t go bust? They are profitable and capitalized decently as of now, but 10 years is a long time.

• What a great CVR-structure! Not sure why Xoma needs a whopping 25% for this to work, but still. It´s simple and 10 years is great. Not the usual Tang-stuff fully loaded with conflicts of interest.

• In the first draft from Xoma, the CVR-structure only included the Pfizer- and JNJ-assets. Maybe they wanted to “steal” the platform/IP/1266? Anything here maybe more valuable than I think it is?

• These remaining assets have to be monetized within 2 years. Xoma did a decent job on KNTE with this, so I´m hopeful. KNTE also paid out full “Additional net cash”.

• I don´t read too much into Versant selling out. Lots of institutions hate CVRs, we have seen that before (just in June with VIGL for example). Maybe it does mean something, but then again - I think the net investment into the CVR after net cash and some minor dispositions will not be as large as it seems.

• I really hope they sell something before closing where we receive 100% of net proceeds. The KRON lease termination also was announced very close to closing, so maybe there´s a chance.

• This is obviously a probabilistic purchase, where you can be correct to purchase the stock here, but still lose money. Buying 10% bets at a 2% probability (making up random numbers for argument´s sake) is lucrative, but you till lose 9/10!

• Annoyingly the stock traded up to 1.52 US$ while writing this. That´s 500k more in CVR value and doesn´t really change a thing in my mind.

This one´s weird and maybe even horrible! I´m writing this up primarily to gather thoughts and - more importantly - feedback and input. While I am long the stock (Disclaimer and stuff!), my conviction is on the lower end. BUT I think it is an extremely interesting situation from an intellectual point of view and there will for sure be learnings from this one! If that is not enough for you, I tried to put lots of pictures in here!

The market cap of Clearside is very low and its liquidity even lower. Do not buy this bceause an unemployed, bored dude on the internet writes bullish stuff.

• Clearside Biomedical (CLSD) recently initiated “strategic alternatives” (PR) and fired all(!) personnel. I have reason to believe we´ll see one or more transactions this year.

• They own a Phase-3-ready product (with decent to heavy competition), no net cash and a whole series of milestones and royalty rights connected to its “micro-injector technology in ophthalmology”. Especially two of those are interesting, as they relate to an approved therapy marketed by Bausch (XIPERE) and a therapy ABBV is (co-)developing. They´re calling it a sizeable opportunity and that implies a value worth many multiples of Clearside´s market cap.

• BUT this is where it starts to get hairy: Clearside actually sold its rights to the first ~106 million US$ of proceeds (from any source basically).

• The company also has not enough net cash to survive until “maybe-cash-flow” on its own as of now.

• Clearside has no large institutional holder that is known.

• Ex-CEO (now advisor) owns a sizeable chunk of shares and options.

• There are a couple of warrants outstanding that might become annoying. But that´ll probably only happen in a case where the stock works great.

• There are paths to a multibagger as credible as a path to zero!

All calculations referencing a stock price of 3.61 US$ / market cap of 18.9 mln US$.

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What this is about: The Microinjector

2 elemental slides / pictures framing the technology owned:

We will circle back to this several times, but the core value proposition of CLSD-technology is, that they can deliver drug into the eye without poking a needle into your eyeball.

Just compare the above picture from CLSD to this “regular” injection procedure. I don´t know about you, but my brain tells me to just run away:

Whenever we will be talking injections to the suprachoroidal space, that´s basically a reference to the CLSD microinjector. Now the good news: This is not science fiction but actually used in a FDA-approved product: XIPERE (Approval PR from 2021).

Recently, Australia and Singapore joined the ranks with China to follow soon (probably). The technology is also licensed to 3 more parties with 2 of those in very advanced development stages:

Before we get all too excited about this, let´s sprinkle in some bad news! But first:

Housekeeping: Market Cap and EV

After the recent 1:15 reverse split, there are 5.23 million shares outstanding. Pro-forma cash (adjusting for some inflows and restructuring) as of June 30 is 9 million US$ with roughly 6.4 million US$ in liabilities (including 70% of long-term lease liabilities). So I think they are roughly broke by about soon, probably safe to assume a couple of million US$ in net debt here until deals are closed.

Speaking of debt, here comes the first major enemy to the bull thesis: In 2021, they received 32.5 mln US$ from HCR in gross proceeds and in return sold their rights to the first royalties and milestones received from the microinjector-technology. There was a minor and cryptic amendment to this just recently, where Clearside received 3 mln US$, actually has to pay back less in total (still a whopping 106.5 mln US$ with 1.5 done so far) but moved some remaining assets under the umbrella of this agreement and cleaned up the agreement for the probably upcoming transactions.

Now we have the 2 major hurdles (don´t worry, there are more!) to overcome: Payments to Clearside have to pay off the remaining 105 million US$ payments to HCR, 3-10 million US$ in net debt and today´s market cap of 19 million US$. Looking at it that way, the Enterprise Value sits at 127-134 million US$. That´s not true for assets outside of this agreement (which could flow to CLSD equity directly), but given the cryptic language in the 8-k linked above, I´m not sure whether there are assets remaining outside of the scope of this agreement.

There are also 740k warrants out with a strike of 24.3 US$, which have to be redeemed at Black Scholes in a change of control. Given the high strike, not a big worry here. They might dampen a win a bit, but my concerns are somewhere else.

I think this is where 90% of the usual “strategic alternatives”-investors just call it a day, but I think there is reason for hope and I will demonstrate, why. But first: more bad news!

The assets and licensing agreements

So far, CLSD has 4 major agreements ongoing where they are poised to receive payments. The bad news is, that they in-licensed the technology partly themselves. They are subject to a “low single digit” (I assume 1%) royalty on sales and a 8% sublicensing-fee on upfronts and milestones. They also have to pay maintenance payments of a couple hundred thousand US$ a year.

Phase-3-ready CLS-AX in wAMD

Besides the sublicense-agreements, they own CLS-AX . I do have a lot of questionmarks here. This is from the probably cherry-picked CLSD slides:

CLSD appears to show similar efficacy. Eyepoint is valued just short of a billion US$ and Ocular is chilling at a valuation of 2.1B US$, with both of them shortly before their respective Phase-3-readout in long-acting therapies (to reduce the amount of times a year you need to stick a needle into your eye!) for wAMD-patients. We´re talking a 15B US$ market here, this slide is from Ocular:

Now I don´t know if Clearside´s therapy is as competitive as they show. But there is clearly demand for “less eye-poking” and Clearside could not only provide less poking in general (vs Eylea/Vabysmo), but suprachoroidal-micro-poking instead of needle-through-your-eyeball-poking. This might sound extremely superficial (because it is) but I also think it makes a bit of sense?

The caveat is … clear: CLSD obviously somehow failed to gather financing or strike an otherwise acceptable partnership agreement or they would not be in the situation they are in. But we also know that the past 12 months have been absolutely horrible for financing anything but the most promising therapies. Compared to the market cap (or even the full EV if CLS-AX is now also subject to the HCR agreement) this can surprise wildly to the upside. But I am actually listing it as simply a wildcard - we have more assets and ground to cover!

Xipere - marketed by Bausch

Let´s add more obscureity! As I teased before, Xipere was approved in 2021. As I understand it, it is basically a corticosteroid to treat Uveitic Macular Edema, but injected using the SCS Microinjector. So the underlying drug is not really novel, which is probably one reason for sales that are - so much we do know - for sure no blockbuster. This also is like a 150-300 million US$ market according to ChatGPT, it estimates that Ozurdex from ABBV does about 90-100 mln US$ in Uveitis worldwide.

The main issue for us: Neither Bauch nor Clearside tell us anything about the sales and Bausch is not obligated to pay any royalties on the first 45 mln US$ in sales (in total, not annually). All we know is that sales have been less than those 45 mln US$ so far.

Naturally, I asked ChatGPT to do the work for me and it came up with quite an interesting result:

I would love to hear feedback on that. I think it is very obvious that the estimates are too optimistic. If Xipere had done 21 mln US$+ in 2023, Clearside would probably be booking some royalties already, as the 45 mln US$ hurdle would most likely be cleared.

So maybe there are some additional rebates or methodological weaknesses the AI is overlooking, but the treatment is obviously used? Even if Xipere does only 30-40 million US$ in the long-term, Clearside receives “high teens to 20%” of royalties or probably 15-16% net of the 1% they have to pay.

One interesting nugget is that we will hear RGNX talking positively about Xipere soon, so I guess somewhere between 30-50 mln US$ in sales or 4.5 to 8 mln US$ in annual royalties to CLSD is attainable? I don´t expect Xipere to do the heavy lifting required to pay off the HCR agreement, but I would not be surprised to see some meaningful contributions. And once HCR is paid off, we´re talking 25 to 50% of the current market cap in annual royalties. There are also 55 mln US$ in additional milestones. Wouldn´t expect too much here, maybe a couple million if annual sales of 50 mln US$ are achieved? Ignoring them for now.

They also licensed Xipere to a chinese partner, NDA accepted in February 2025. 22.5 in total milestones remaining with tiered royalties from 10 to 12% of sales just for China.

The crown jewel: REGENXBIO/ABBV-partnership

It is kind of telling that we have talked about one approved asset and a Phase-3-ready therapy with peers in the 1-2B US$ range and only now look at what I think is the most compelling opportunity in this mess. I´m putting the summary of the agreement in here:

CLSD is basically out-licensing its Microinjector to RGNX for use in ocular gene therapy. If you are curious about the current state of ocular gene therapies, look at a chart of Adverum (ADVM). If you were to assume the current sentiment to be “not great”, you would not be wrong exactly!

So why is this idiot on the internet telling you it´s a “crown jewel”? RGNX subsequently partnered up with ABBV in 2021 on the therapy (RGX-314). There was a lot of silence / neutral reporting on the partnership for quite a while, but starting over the course of 2023 until today, the tone shifted very clearly! I´ll be bombarding you with some snippets!

Am I the only one that thinks going from “small to midsized opportunity” to “highly transformative” and “significant opportunity” is a meaningful uplift? And we´re talking ABBV here, I´d assume they have quite a hurdle to “significant”. More:

Compare that to the neutral statement from 2021:

Now, before we get just too excited, there is ANOTHER caveat here! Does it ever stop? (Spoiler: No). Look at this pipeline-chart from RGNX:

As you can see, the wAMD trials are currently studied with subretinal delivery, so they are outside of the CLSD-agreement. The just recently initiated a Ph3-study in DR that uses the CLSD-delivery. What is subretinal?

“Urgh” you think? Yeah. Me too. It´s not quite clear from the pipeline-chart above, but RGNX/ABBV are actually also studying CLSD-delivery in wAMD and completely changed to that for the just recently initiated studies in DR&DME. Quite the endorsement, no?

Let´s see - again - what the partners have to say about suprachoroidal delivery:

Oh and here is RGNX on CLSD going out of business :)

Clearside actually does not manufacture the Microinjector themselves, german Gerresheimer is doing that for them. So I don´t think that is something to worry about too much.

So… RGNX likes it, ABBV likes it - what´s in it for Clearside? Mid-single-digit-royalties + some “meager” milestones (31 development / 102 sales). OTOH, not so meager compared to the CLSD market cap or EV. A “casual” in-office gene therapy in combination with anti-inflammatory eye-drops for a couple of weeks to reduce / eliminate inflammation could generate a lot of revenue. Huge markets here in 3 indications and the excitement from ABBV would not exist if that were a 500 million US$ opportunity. They paid RGNX 200 million US$ just to initiate the studies in DR/DME!

Clearside receives royalties for the longer of A) 7 years or B) the expiry of the last valid patent, on a country-by-country-basis.

We can now model ourselves to death, but at the end of the day: IF this drug is successful, the payoff to Clearside will probably be 200-500 million US$ gross / undiscounted, depending on exact royalty rate, sales milestones, royalty term and - of course - commercial success of RGX-314.

If you want to reduce the stock to a single thesis, it is that RGX-314 will be successful and that value will partially accrue to shareholders at some point and everything on top is gravy. Is the PoS here 20%? 50%? 70%? I´d argue we´re looking at a rather high PoS for technical study success with remaining doubts about the commercial opportunity. Oh and this is of course subject to the HCR-debt. But one single year of 800-1.200 mln US$ (yes, I´m just making up big numbers now!) in sales with a 4-6% net royalty will probably wipe out all the debt (since that´ll triger lots of milestones as well).

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The remaining partnerships

Now, that´s not it. Clearside has also partnered its technology (all subject to HCR-debt) to Aura Biosciences (AURA) and BioCryst Pharamceuticals (BCRX).

Aura is currently running a Phase-3-study in a rare ocular cancer. CLSD is eligible to receive 19.5 mln$ in additional non-sales milestones as well as “low to mid-single digit royalties”. Their market cap is 380 mln US$ so the market seems to be taking them at least somewhat seriously? No idea though. Would be a welcome addition to the payment stream.

BCRX just recently initiated its first clinical study for the respective compound. Interestingly, it is a “failed drug”, so they know the attributes very well and think they can use them to their advantage if paired with suprachoroidal delivery. This is what they said on September 4, 2025:

The milestones on this are not too shabby. 30 mln US$ remaining in pre-commercial payments, 47.5 million US$ in sales milestones (with the highest hurdle at 2B US$ - so no). Tiered mid-single digit royalties. Most relevant value here is probably in the pre-commercial payments, simply given the nature of early development.

More to come?

Now, hear me out. I think we can safely assume, that Clearside maybe did not take every opportunity available to out-license this because they wanted to keep some optionality in development for themselves? Will interest in the technology increase, if and when more products come to market or show strong Phase-3-data?

There is little reason they could not strike additional deals. Maybe there are no indications left? Remember, author = idiot generalist!

More caveats and risks

Let´s get back to the core of this write-up: problems.

Patents around the Microinjector

I don´t really know when and if the (relevant) patents expire. Companies usually issue tons of patents, some of them make sense and hold up, some don´t. The royalty agreements I checked usually have a structure that asks for royalties for a certain minimum amount of time regardless of patents (most importantly RGNX/ABBV).

Then there are drug/device combinations like Xipere, where the approval is tied to the combination - but the underlying drug ist just a corticosteroid. Could Bausch just replace the CLSD Microinjector at some point? How much would that cost? What studies are needed?

So all the agreements I checked have a decent minimum term, but I would be lying if I said that I feel comfortable around this situation.

The shareholder base is… meh?

From the latest Proxy as of June 30 (Pre-RS-numbers):

Mr. Wiles is an ophthalmologist and involved in the stock since much higher. I will have the audacity to claim that he is probably not involved because he analyzed the risk-adjusted present value of the future cash flows of the partnerships to be higher than the market cap and the HCR royalty, but he just likes the technology (and likes /liked CLS-AX)? Happy to exchange thoughts and hear your view, if you happen to read my ramblings!

Cannot find much on Whitmore or his investment vehicle grace brothers, he is chairman somewhere else. Just did a quick Google search, don´t really care.

Insider incentives

Lasezkay (ex-CEO, still advisor) and Deignan (ex-CFO, still advisor) have some decent exposure here. These are their pre-RS-options:

So these options run for a long time and their strikes are actually attainable, if one or more therapies are successful. Down - but not out. Let´s take a look at their agreements when the company let go of all employees:

The ex-C-suite gets some nice payments on a change of control (Factored these into my net debt at the beginning). So they are highly incentivized to sell the company. Sadly, they are only partially incentivized to sell it at a high price (through their remaining options).

I would´ve preferred it, if an external liquidator purely focussed on shareholder value would´ve come in to be honest.

They really put “the opportunity to retain the Company-issued laptop computer provided to the executive” in there. Great stuff.

What is it worth?

I don´t think it adds any material value to pump like 6 different royalty- and milestone streams with tons of assumptions and blind PoS-guessings into an excel and tell you what number is coming out at the end (I actually did it but it´s a lot of bullshit²).

What I did though is play around a bit and see, if there are reasonable scenarios where HCR is repaid in full and there are material payments to the company remaining. I think you can draw realistic pictures where the NPV accruing to shareholders eventually is twice to 10 times the current market cap. That should be clear just from this article. The overarching question is:

How do shareholders win?

There is probably a very decent shortfall to fund (just in G&A and some payments to the license-originator) since it´ll be a couple of years until the HCR-debt could be paid off.

Will Clearside sell off partial assets / amend the deal with HCR so they can go dark on the OTC and just exist for 200-300k / quarter until payments arrive? Will they sell themselves to a royalty aggregator like Xoma? If yes, how does payment look like? Will there be a CVR? Will we even see a take-under in this scenario where all of the value is put into the CVR? How much of the payments will then accrue to shareholders?

The best case would probably be if CLS-AX were to be sold and brought in a large amount, putting the company back into a decent net cash position and then we go from there.

From the partners, I feel like ABBV/RGNX and Bausch are the only ones in a position to pay off Clearside, but I fear shareholders of Clearside will not like the prices these “partners” will quote for that.

Bottom line: I feel like the collective NPV of all assets and partnerships is larger than the EV - driven mainly by the RGNX/ABBV partnership and Xipere. This bet is highly probabilistic in nature though, so this might very well be a scenario where buying the stock is the “right” thing to do - but you still lose. This can be a zero, no doubt!

I´m asking myself if I got involved just because the situation is so interesting and exotic - or if there is really a bargain to be made here? I lean to the latter, but I might just be married to the idea of being right here in such a clusterf*** of a situation. There are probably some readers in here thinking “Well that´s a nice short pitch right there, why did you buy the stock”?

Anyway - the weakness around the reverse split represents an interesting opportunity if something decent happens. This is not a large position for me, but not that small that it would not annoy me if it went the wrong way. What I would have loved to see are more positive aspects around governance (strong independend board, large influencial shareholders).

Maybe it´s better that way since it keeps the position small. There is probably also a case to be made to just own this tiny (or not at all?) and simply wait for one or more dominoes to fall into place.

Let´s see what happens. Tell me what you think! Do your own DD.

Disclaimer: I do have a beneficial long position in CLSD.

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I have to start by admitting I “stole” this idea from Adar1. Big shout out, love their stuff. Full on fanboy. I have been posting on X for a while now and highlighted Protagonist (PTGX) initially during the tariff-selloff in biotech (which was also a “oh my god Peter Marks”-selloff everybody naturally forgot about already) at 48$.

It wasn´t even really selling off - the fascinating thing was, that strong data over the course of yearend 2024 and 2025 has been not really accounted for. In hindsight, it was also a “bad” sell-off investment since other stocks where way heavier discounted, but it doesn´t hurt to put in some non-shitco-stocks in your portfolio once in a while.

Why the opportunity: Usually I prefer stocks below 1 bln$ in market cap as the probability that I am seeing obvious stuff that everybody ignores (TBPH is an excellent example) is larger. I think PTGX is mostly misunderstood but also somewhat strange to own, as it now is a mix of a royalty and development company which require vastly different assumptions about WACC for example, which makes this hard for the pure DCF-bros on the street. Also I realized that there is basically no decent valuation-oriented write-up out there and that´s a shame.

What is PTGX about?

The thesis in a quick overview:

• The company is specialized in developing peptide drugs and owns substantial rights to two drugs which are about to be approved by the FDA (very high PoS). Both are partnered (JNJ and Takeda).

• The company has a very decent amount of cash on the balance sheet and should never need to dilute itself again.

• Valuation wise, I think the JNJ drug covers more than the current valuation, making everything else a free call-option - and a very substantial one at that!

• There is a very clear, understandable path to a potential triple within 18-36 months and downside is well-protected in my opinion.

• They own interesting pipeline assets as well (will touch on all of them).

• I am as confident as you can get when you cannot discern a peptide from a protein, that their platform holds a decent amount of value. I infer this crazy view from the fact that they will have developed two approved drugs in 12-16 months.

• There is a whole body of potential transactions possible to unlock value. As usual, corporate governance will be more important than we´d like it to. But as you will see, this is not one of the usual horrible companies.

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Going through the pile of assets

We are going to look at the following parts:

• Icotrokinra (JNJ-2113) partnered to JNJ, a soon to be monster-drug accounting for the largest part of value in my eyes.

• Rusfertide (TAK-121) partnered to Takeda. Probably a lot smaller drug, but PTGX kept a ton of economics on this.

• The platform and pipeline assets: Oral IL-17 (LLY bought a comparable asset / company for 2.4 bln$), an obesity drug (Triple-G-thingy) and oral Hepcidin, which is basically a next-gen version of Rusfertide. They might sit before / around Phase-1-initiation, but all of them are much more interesting than “just a Phase-1-asset”.

• Balance sheet. Net cash, burn - all that stuff. Upfront: It´s very solid.

Just before we start: At a stock price of 58.36$ the market cap is 3.6B US$ and with net cash as of June 30 of 615 million US$ the enterprise value sits at 3.0B US$. I don´t really like the term “enterprise value” here as that cash is at least partially earmarked for burn, but I guess it makes sense to have both numbers in the back of your head as we look at the different assets.

Icotrokinra - a monster in the making

Ico is an oral IL-23R Peptide Antagonist. The drug is intended to be marketed in several indications in immunology:

• Psoriasis (Study results Phase 3 / NDA Submission July 25)

• Psoriatic Arthritis (Phase 3 studies ongoing)

• Ulcerative Colitis (Study results Phase 2)

• Crohn´s Disease (Phase 3 planned by JNJ)

The interesting thing about this drug is that its Mechanism of Action (MoA) is well known as there are injectibles on the market. Most importantly Skyrizi (AbbVie) and Tremfya (JNJ). They pulled in 11.72B and 3.67B US$ in 2024 respectively or 15.4B US$ together. The whole class of IL-23 did about 25B US$ in 2024. Now usually the advantage from oral drugs (convenience mostly) is compensated by reduced efficacy. And this is the thing that makes Ico very special.

The data so far is so strong, that JNJ initiated a study to show superiority versus injectables in Psoriasis (that basically almost never happens in orals vs. injectables). Even if they don´t show superiority - efficacy on par is already more than anybody had hoped for 24 months ago.

Every study result from Ico so far is completely unambiguous. The drug is well tolerated and you can drive a whole fleet of trucks between the active arm and placebo. The placebo-adjusted delta on its primary endpoint in UC was as high as the absolute result for Skyrizi in UC (yeah the drug doing 11.7B US$ annually). Cross-trial comparisons (not placebo-adjusted sadly) from PTGX itself:

The intriguing thing is, that with Psoriasis and UC reading out very positively, the two other indications should have an extremely high probability of success (happy to hear a counterargument), as the injectables work very well in these.

The turning point for Ico were the incredible strong UC-data in March 2025. Up until then, the market was very doubtful whether indications apart from Psoriasis would be working. Even though 6 months is past, I still feel the market is not appreciating how strong these results are and what these implicate.

Some thoughts:

Ico will for sure take meaningful share in the existing market in probably all four indications and there is a decent shot for it to be the preferred first-line treatment. What might become even more important is that there are still a lot of patients not seeking or undergoing treatment:

As a safe, efficacious and convenient drug, Ico brings all that is needed to actually expand the market. JNJ put out what I thought was a really strong statement on its Q1 2025 earnings call:

They claim the drug is going to do twice consensus estimate in 2028 and bring in 1.4B US$. Just to be clear: That is still very much the launch phase of the drug as it will take a couple of years for the additional indications to come to market (unsure about potential off-label-usage):

These are the Skyrizi sales since launch:

What can I say? What is an oral going to bring in that has efficacy on par? What is an oral going to bring in that is superior? One indication of demand is that JNJ enrolled their studies 3 times as quickly as they anticipated.

So I´m not the one to tell you whether this is a 3, 5 or 10B US$ drug. I guess a lot of it actually comes down to sales tactics of JNJ and how they position it. Let´s take a look at what PTGX stands to earn:

There are 120 million US$ in approval milestones remaining and 650ish million US$ tied to sales milestones. Then there is a tiered royalty rate 6-10% of sales with the highest level kicking in at 4B US$. Which is completely attainable from my point of view. Here is what the payments will roughly look like (made some assumptions where royalties increase):

So I think PTGX possibly earning 400-900 million US$ royalties annually is quite exciting. In a DCF to 2040 I am seeing this Cash Flow worth between 3 and 4B US$ and I basically skipped most of the sales milestones, where we can assume those are probably all going to hit? Kind of a random element of a margin of safety.

I saw some “base case DCF” from a fund where there were 13B of sales in 2040 baked in (excluding PoS-adjustments), and that was before the strong UC-data in March. Given what we´re seeing in sales in the marketplace, hard to say this is completely unreasonable? These numbers always sound crazy beforehand and then it looks so obvious in hindsight. Just look at that Skyrizi ramp. The market expects this drug to bring in 20B eventually.

In an attempt to keep this somewhat brief: The data are strong and might even become superior. JNJ is very excited about this drug and specifically calls out that the market is too skeptical. The end markets are huge. At this point, the bear case is probably that this is only worth 1.5B to PTGX (implying maybe 3-4B peak sales) on a 10% WACC - which is too high.

One more thought I will come back to: Just for the sake of argument, let´s take a DCF going out to 2040 that is worth 2B on a 10% WACC (I mean it´s essentially a JNJ bond so that is quite generous). If I change that discount rate to 7.5%, the value jumps to 2.49B US$. That is an IRR that would not be unusual in a sale to JNJ or RPRX et al, especially if you slice the royalties (for example selling royalties on first 4-5B US$ and keeping the remainder).

I am boxing Ico at 1.5B/3B/4B Bear/Base/Bull on a 10% WACC with 20-30% upside just if a buyer with strong credit steps in (on a 7.5% WACC my base case sits around 3.8B US$ hence the title of this article).

Still ignoring sales milestones here, which might be very dumb given the ramp JNJ is implying with its 2028 sales guidance of 1.4B US$, as they would provide a great lift to NPV as they would happen reasonable soon.

I feel like my bull case isn´t even a bull case. Why would an oral, efficacious drug (especially if superior!) not be the preferred first line treatment overall?

Rusfertide: To opt-in or to opt-out?

Rusfertide is a drug that will be used in Polycythemia Vera. The Phase-3-study was overwhelmingly positive (mostly expected) and patients on the drug needed a lot fewer phlebotomies. What did surprise in a positive way though is that the drug also improved fatigue and symptoms in patients (stat sig, albeit the improvement looks small to me). Unless I am getting something wrong here, the drug improved this score by a whopping 1.95 points vs. placebo:

So it´s not nothing and the market did not expect the drug to do that, but the clinical relevance is somewhat unclear to me. I´ve seen some people get excited over this, maybe I´m missing something here? Anyway, not enough for me to be crazy bullish about this. There doesn´t seem to be much debate on the drug. It works, it does what it is supposed to do and alternatives are scarce or uncomfortable:

Takeda is calling for 1-2B US$ in sales (approval expected for H2 2026) and interestingly in terms of economics, PTGX has two options in front of it. They can either “opt-in” or “opt-out” of US co-commercialization. Importantly, PTGX does not need to build a commercial infrastructure to opt-in. It just means they share 50/50 in the PnL of the drug whereas they receive (generous) royalties and milestone payments if they opt-out. Ex-US-rights do not change either way.

The decision has to be made in the 90-day-window beginning 120 days after NDA filing, so it´ll be a mid-year 2026-decision.

My thoughts: Right now the market probably tends to prefer the “opt-out”: It provides near-term cash (that the market will then completely discount) via the 400m US$ opt-out payment and simply produces positive cash-flow going forward (no matter how small or large sales are). Quoting the CEO from the recent Fireside at Citi (Sep 3):

As you know, the opt out is very incentivizing with a $400 million opt-out fee. And even the NDA approval milestone has a $25 million difference between whether we opt out or stay opted in. So actually, it's like a $425 million money back, so to speak. One way to look at it is like the opt-out is kind of more front-end loaded, whereas the opt-in would be more back-end loaded.

And of course, if it's a $1 billion drug, then it's an easy decision. You just opt out. If it's a $5 billion drug, you stay opted in, that kind of thing. The truth may be somewhere in between.

So with Takeda guiding to “1-2B US$ peak sales” and the CEO claiming that 1B US$ is an “easy opt-out”, I think the tendency is quite clear. But there is a lot that could happen until then:

• Takeda and PTGX renegotiate the terms for a middle-ground-scenario.

• A third party is interested in Rusfertide royalties. PTGX opts in but then sells that cash-flow-stream (including potential losses at launch) to this third party for an amount (that they think is) higher than simply opting-out.

• Another transaction gives PTGX enough cash that they feel opting-in is less of a financial risk.

• PTGX is stripped apart or bought out and a whole different plate of options becomes available.

The exact royalty rates are unknown but we know that the highest tier in an opt-out (29%) would kick in between 1 and 2B US$. Interestingly, that is basically almost a 50/50 split! The royalty always works on sales - but in the 50/50 split, PTGX has to carry their share of COGS and SGA. If you play around with numbers, you will realize how rich 20%+ royalties really are.

On an opt-out, Rusfertide will probably provide between 100 to 200 million US$ in annual cash-flow after the initial sales ramp. Add 475 million US$ on opt-out + approval as well as potential 500 million US$ sales milestones.

I´m boxing this at 750 / 1.200 / 1.400 million US$ in a Bear / Base / Bull scenario assuming an opt-out on a 10% WACC. They are so close due to the fixed 475 million US$ near-term-payments on an opt-out providing a high base value.

Remember: As with Ico, these are numbers going up 10% annualized if time chooses to pass. Just FYI at this point: Just my base case for Ico + Rusfertide is at 67.5US$ per share without any of the substantial assets coming up now!

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The pipeline assets

PTGX owns 3 different advanced assets of note which are still wholly owned. We will look at each of them briefly and try to benchmark / box their value as well. Let´s give it a try.

Oral Hepcidin

Personally I think this is not the most lucrative development asset, but as we just talked about Rusfertide, it makes sense to start here. This is oral Rusfertide basically. Kind of interesting to see this play out, as this asset is not partnered to Takeda yet (they seem to have a right of first negotiation or a similar option?). But this asset is PTGX developing a potential Rusfertide-Killer coming on the market in 5-7 years just as Rusfertide would probably be entering its most profitable peak years.

A super weird setup if you ask me. Takeda might be even forced to acquire this asset if it shows any promise in early studies?

Boxing this pretty blindly between 0 / 150 / 400 million US$. But we´ve seen the payments for Rusfertide and an oral version should be very quick to proof of concept, so this might become quite big soon. They intend to nominate a development candidate in Q4 2025.

I realize I might be too aggressive here as this is not even in the clinic. But PTGX developed Rusfertide and have a decent track record as of late with 2 pre-NDA blockbuster-drugs. The 150 million base case is basically a 10% PoS on a 1B US$ value with a 50 million US$ extortion fee towards Takeda attached. Not gonna sugarcoat it, throwing darts blindly here.

Oral IL-17

Now this one is where it gets interesting if you ask me. In 2023, Lilly acquired Dice for 2.4 billion US$. That was their pipeline back then - basically just Oral IL-17:

In their October 2024 conference call, LLY announced that DC-806 has been killed and DC-853 has been prioritized as it is the more promising candidate:

I´d say this is kind of a mixed bag, but the dream is well and alive. Now PTGX intends to start a Phase-1-trial in Q4 of 2025 which will then inform a Phase-2-study (psoriasis probably) poised to start in H2 2026. On this random graph where I have little clue what is actually shown, their own candidate looks much closer to the injectables than DC806:

I guess it means a lot less drug is achieving a similar or better “target effect” than Bimzelx or Cosentyx (doing like 6.5B US$ a year).

I think this is just a big, fat call-option. Especially if LLY produces promising results, so we do not necessarily need PTGX itself to hit a study for this to move the stock. A DICE-like buyout would cover 2/3 of the current market cap.

IL-17 is almost as big as IL-23-inhibitors (Ico):

Given that PTGX developed a total killer of a molecule with Ico, is it unreasonable to expect they have an above average probability of success on repeating that in IL-17s? There´s one caveat to this I should highlight. This is from JNJ:

So they are claiming that Ico is basically mainly their work. Couple thoughts:

• The collaboration was established in 2017, so it would be safe to assume that PTGX has a lot more know-how (and resources!) now than back then.

• PTGX might be able to learn from what JNJ did and apply that internally to everything that happened since (I would hope?).

• JNJ might be overstating their own role to pay less in an eventual acquisition of PTGX ;-)

Boxing it at 0 / 200 / 1.200 million US$. Main risk is that anchoring to the DICE-acquisition might be totally wrong. IF their initial data is promising, that box might completely explode to the upside.

Ico is worth “only” ~3-4B US$ because they gave that drug away quite early, royalties are rather low and there were not in a great position to negotiate back then.

What is a large pharma company going to think, if the developer of Ico puts out strong early IL-17 data? The valuation should jump into the billions immediately. This is the thing to watch in my opinion.

Triple-G: Is obesity still hot?

While I might know shockingly little about the topics touched on so far, I am really out of the loop on obesity. The market is moving pretty fast with all the players expanding into different directions: Better injectables, orals, Amylin, longer-acting injectibles, combinations to suppress the undesired loss in muscle mass and at least like a dozen serious players involved. Generally, the “too-hard pile” for me.

PTGX recently nominated two lead candidates, a once-daily oral pill and a weekly injection. Same thoughts: They have a ton of know-how by now in peptides. Why wouldn´t they be able to come up with a strong molecule?

They showed very decent data in mouse compared to Retatrutide:

Some random thoughts:

• I don´t feel like speed or depth of weight loss is the critical factor. Convenience, tolerability and a lack of side effects are.

• Creating a drug that just needs less active ingredients would also create lots of value to a pharma company.

• For the time being I´ll see this as just another candidate in a vast pool that is also heavily diluted by chinese competition and ever-dropping partnership payments.

• Not seeing the big differentiating factor here, which is absolutely critical.

• Being able to develop a molecule on par with Retatrutide is a strong signal that their drug development capabilities are something to watch

Even more random excursion. Look at this pre-clinical data from WVE:

I have ZERO clue if that is reproducible in human trials. But a drug you could take twice a year after stopping GLP-1s pro-longing the weight loss without compromising muscle mass? That is exciting and a big differentiation (IF it works - again, no idea) for a meaningful unmet need.

Boxing this at 0 / 0 / 200, basically allocating a small probability of success on a huge win if they surprise to the upside.

The platform

I´ve said it multiple times by now. Two soon-to-be approved drugs poised as a blockbuster and interesting leads. The number of companies out there able to do that are rare. Even rarer is, doing that while burning “only” 150-190 million US$ a year.

At some point, some pharma company will take long and hard looks at them and think about acquiring the platform. What is it worth to be able to develop strong candidates on a reliable basis? Can a pharma pump out 3-5 INDs a year if they invest here?

This thread looks at what a platform can suddenly pay if strategic interest materializes.

Boxing this at 100 / 500 / 1.000 million US$. If PTGX happens to develop not only a competitive oral IL-23 but also an IL-17, these numbers will look ridiculous.

Balance sheet and burn

PTGX has received a lot of milestones and upfronts lately with deal amendments with Takeda and continued success with Rusfertide and Ico.

As of June 30, they have 673 million US$ sitting on their balance sheet. Minimal operating liabilities means that is roughly 648 million US$ in net cash or 10.42 US$ per share. Current burn is roughly 180 million US$ per year. I expect that to increase a bit with 3 compounds entering the clinic, but Rusfertide expenses will fade out at the same time.

Here is one crazy thing. PTGX is actually not sitting on huge tax losses, their deficit on the balance sheet is “only” 390 million US$. So far they kind of have not been a total dumpster fire and with a lot of payments coming up, they will actually have generated a positive return on their equity even before meaningful royalties are coming in.

Still - I am substracting 400 million US$ of net cash because reason and I also capitalize their running costs at -350 / -200 / 0 respectively. Let´s have the tiniest look at governance:

Capital allocation

There is nothing of substance to be said here. I am disappointed that PTGX did not put out a buyback with their stock in the low 40s after the strong UC data. The CEO is openly talking about 4B US$ for their highest royalty tier for Ico being a low bar in his opinion. It is inconceivable to me how you cannot initiate a buyback the very second you say that if your stock trades below ~55 US$.

But it´s biotech, buybacks are rare. Whatever. What I will say that I think PTGX looks quite nimble in their spending and I have seen a lot of companies achieve a lot less with a lot more burn.

Incentives

The management team is very well incentivized, especially the CEO. His options are very deep in the money, so he is feeling every dollar up or down in the stock. All in all I think he makes roughly ~2.5 million US$ for every dollar the stock goes up - and loses that when it goes down!

Oher than that, the board is staggered.

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Putting it together

I think there is an important element here: My “bear cases” are usually not total bear cases. The bear case for Ico is that it is not approved and a zero. The probability of that is probably also close to zero. The bull case for the oral IL-17 is probably a value of 7-10B US$ - not 1.5B. I just try to compress these cases and apply conservative probabilities. So all of these are probably more nuanced versions of the base case:

To be honest I think my bear Case for Ico is laughable given the incredible strength of the data so far and that is just not going to happen. The funniest thing is that in 24 months, the oral IL-17 might be the most valuable asset of the company.

I also would not read that table as “3 cases”. This is just to see, what moves the needle, what doesn´t and what combination of assets might compensate for a failure of another. If Ico ends up in a bull case and everything else falls apart, we still win?

I did NOT account for taxes here. Always catches me off-guard when I´m looking at companies who don´t have 1.5B US$ in tax losses. I think I did introduce enough elements of conservatism though to somehow account for that. If large transactions happen that introduce taxes, I guess it´ll be some kind of a bull case anyway and I will adjust after the fact.

Reminder again: Ico and Rusfertide appreciate by 420 million US$ or 6.75 US$ a share annually in my base case model, far outpacing the current burn rate.

This is never about valuing a company to the dollar. I need to know what the main drivers are and scenarios for the different assets, so you can adjust if good news or sh*t hits the fan and to know how to size the stock.

How do we win?

I tried to keep this as structured as I could so far, it´ll get a bit more rambly and random from here on I guess?

I´m not one to solely focus on catalysts. I think time passing for good assets and more people getting drawn towards the stories as Ico and Rusfertide are being approved in 2026 will do enough to drive the stock towards the 70-90 US$ range (excluding pipeline changes). Nevertheless, here are some catalysts to look out for:

PN-881 (oral IL-17) is the main thing to watch imo.

Naturally, Ico is the one big driver here and as long as you´re not comfortable with that asset, the stock is hard to own. If you are comfortable, it´s a no brainer. Maybe I am too pessimistic on Rusfertide. If they can do 2B US$ in sales, that might move the needle - as the wise leader says - “bigly” since royalties are so damn high. Going from 1 to 2B US$ peak adds 290 million US$ in annual income - and could also drastically increase the potential value of oral hepcidin. Some nice reflexivity in there.

I think the company might obviously make for a very interesting acquisition candidate. On the other hand, an acquiring company might probably not be interested in Rusfertide or Ico royalties (unless the buyer were to be Takeda or JNJ).

Random M&A ramblings:

• The royalties on the two drugs will be very valuable. Companies like RPRX state that they are usually happy with high single digit IRRs on approved drugs and we have seen lots of transactions implying yields in the 7-9% IRR range. That could unlock a lot of value just from a WACC-related uplift.

• We might also see a series of royalty transactions, where a buyer acquires the royalties for the first 2B US$ in sales for a very low IRR. PTGX then retains the remainder, waits for sales to go up and then transacts again on the next slice of royalties as increased sales compressed the discount rate from bidders further.

• Given the incredible asymmetric nature of Ico, the oral IL-17 and even oral hepcidin, there is the potential for a huge CVR if a transaction of any kind materializes.

• It might be feasible to split the company, in a way BHVN or INBX did. Sell the company to a buyer but carve out the platform with 400-600 million US$ in firepower. Maybe retain some rights on the drugs or even CVR them to shareholders.

• I don ´t really see a “single buyer” paying what management and shareholders think is a fair premium, as the collection of royalties, clinical assets and platform value is just too random.

• I will be quite surprised if the company just continues to exist as is. There is a pretty large Sotp-discount on this stock and it is only unlocked by splitting up (and probably returning cash to shareholders).

• We might end up in a ROIV-like situation where we wake up to 5B US$ sitting on a balance sheet on an Ico sale which is discounted by 2B US$ by the market and where you have to wait 2 more years for the stock to actually go up. OTOH, ROIV provided some great opportunities. Well, you know what I´m saying.

• One should be totally comfortable with the company continuing to invest and develop. If they keep going and develop the next big drug past Phase 2 - what is a transaction on an oral IL-17 going to look like after great data? More risk - but the upside from that might easily be twice today´s market cap while Ico and Rusfertide provide an incredible meaningful floor.

• If true platform fantasy materializes… I mean just look at ALNY. Look at that thing! Maybe time is really our friend here. This is a rare scenario where you can buy a possibly very valuable company much below the intrinsic value before giving effect to any quality premiums - which should clearly be there in the otherwise vast sea of value destruction called biotech?

What are the risks?

This is biotech, so plenty of stuff that can go wrong:

• The two large drugs might sell worse than expected or hiccups like a manufacturing CRL delay market entry.

• Competitors develop better drugs.

• JNJ slow-walks Ico a bit to not pressure the sales of their own IL-23 injectable.

• Value is created but “trapped” inside PTGX and the market takes a long time to get comfortable with the development programs.

• Too much cash introduces massive “lifestyle creep” to PTGX or even gives them ideas about acquisitions.

• The development programs fail - but no one in their right mind would expect all three to succeed.

• It really was JNJ doing all the heavy lifting, Ico is just a lucky punch and the remaining assets are all actually low PoS.

All in all I think these are mostly “luxury risks” and not really existential risks like you would naturally expect at a biotech company. I also think that the market has only realized that partially. There will also be a lot of investors who were focused on “sell-off bargains” in the past 5 months and on the surface, PTGX doesn´t look like it. My opinion differs - I think the stronger than expected Rusfertide data and the incredibly strong results for Ico in Psoriasis and UC have not been priced in accurately.

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Do I buy this now?

That is primarily up to you to decide. I own the stock for quite a while now, but I am trading it as it sells off randomly or appreciates. I love selling puts on sell-offs and selling some calls against my position into strong rallies as well. You have to monetize volatility in biotech in order to compensate against the lack of appreciation through time or what serious investors call earnings.

PTGX is usually one of my larger positions as I see it as quite a low-risk investment, especially in the mid- to low 50s or even 40s. I was motivated to write this when the stock traded down 7% randomly on a single day, but it has recouped a part of these losses already.

Don´t touch this if you are not patient. I don´t have any reason to believe that there is a short-term monetization ahead. This is one of the few biotech companies I can see in my portfolio even 3 years from now if the dominoes fall in place.

I also think it is a great stock to trade if you know what is truly important or not. The obesity run-up for example was as easy a trading sell as the subsequent slump was an easy buy. Knowing what you own pays way larger dividends than… receiving actual dividends :)

Let me know if you think I missed anything important on the stock (I certainly did) or any of its assets.

I want this blog to be focused on idea generation, but I am also very interested in reading and exchanging learnings from the past. And I think this might make for a fun read and several interesting lessons, so let me tell you a story.

Honest & upfront: There is no actionable content in here. If you´re looking for a ticker to burn your cash, this is not your article (well maybe there´s a hint in here). For once, I am going to use actual numbers instead of percentages in this article because I think that makes it real and relatable.

How it started - the positive fail

When I was on vacation (which means I only look at stocks 6 hours a day…) in the Netherlands in summer of 2024, there was an interesting PR coming my way. Aadi (never heard of them before) just failed a late-stage-trial, was cutting 80% of their staff and initiated a strategic review. While not all of those are interesting, I try to look at all of them. Thankfully a friend immediately flagged the press release:

Latest 10Q was only a couple of days old. 27.04 million shares out (some pre-funded warrants), this was their balance sheet:

The PnL:

According to my calculations, they had 2.28$ / share in net cash and an oncology drug (Fyarro) doing ~23 million US$ a year, probably about or slightly above breakeven if you strip out R&D and bloated PubCo costs.

At this time I had to guess blindly how their burn will look like, but with the drug sales, massively reduced R&D and probably less SGA, I was pretty confident the burn would drop to a maximum of 7-10 mln / quarter after 1-2 more expensive quarters. So probably 22mln$ or ~80 cents per share in net cash in one year from then. Plus the drug plus two ongoing Phase 2 studies for that same drug.

The stock dropped to ~1-1.2$ after hours on these results and I started buying. Even if net cash were zero, it was pretty clear to me that this drug could be profitable in a different company and given the fact that most drugs transact somewhere between 2-4 times (peak) sales, a valuation of 32.5 million US$ at 1.20$ (1.5 times current sales) a share was very undemanding to say the least.

The study failing was actually a positive here, since the stock was so cheap already, that the announcement to maximize shareholder value and cut costs was the dominant factor.

I continued to buy the stock over the next few days as I did more research, 1.63$ or 44 million US$ (=2 times current sales without anything else) was my highest purchase price. As the stock kept climbing to ~2.09 US$ a share, I sold out of the majority of my shares. The company was part of an ongoing litigation and I was (probably for dumb reasons) a bit nervous to underwrite the stock in the size I owned it at 2.09$ and a couple millions of settlement payment could´ve meaningfully hurt the stock. Meanwhile, I had EcoR1 and BML entering the stock, which I liked quite a bit.

So far so good - was a quick and easy win for me within 4 weeks and I still had a position on I felt good about. I continued doing DD on the asset and became increasingly convinced, that the stock is cheap under 2 US$. Calculation was simple: Just on a conservative (rather ridiculous) multiple of 2, the stock was worth 20 million US$ in forward net cash + 46 million US$ for the drug → 66 million US$ or 2.44 US$ per share. 3.3$ if you use a real multiple of 3. And at that point you´re not even accounting for any optionality connected with the 2 ongoing phase-2-studies or the situation resolving faster than 12 months.

Since Aadi was a biotech stock, it did what they do: It faded its gains. In an 8-k at the end of September, the company announced that the litigation against it was dropped. That flipped the switch for me, while nobody else cared.

Subsequently and consequently, I was buying shares practically every day in October and November between roughly 1.90$ and 2.05$.

November - when it became wild

I remember the day very clear. November 6. My SO and I were in the hospital, preparing for the upcoming birth of our daughter in December. We were strolling through the forest. My connection? Horrible, as it should be if stuff happens. Something extremely strange happened: A positive development in biotech! After Fyarro was flatlining for some quarters, it suddenly returned to growth:

For me, that was a total gamechanger. As a stupid spreadsheet monkey, I of course immediately annualized the new quarterly sales which increased my price targets by - you´ll never guess it - about 20%. And there´s a voice in the back of my mind: What if the drug keeps growing? That random quarter opened up a whole new avenue of price targets. The trading price of roughly 2.10 US$ per share was implying 20 million US$ in net cash, a sales multiple of now 1.25 (lol) and zero $ for any optionality whatsoever.

I was ecstatic and expected the stock to move strongly, I was already thinking through scenarios how much I would pay up.

It moved from 1.99$ to 2.11$ on that day. I still have that incredibly ugly screenshot I sent to friends from later that day (it´s mostly in German, sorry):

My bear case was at 3.37$ with the bull case going up to 7.6$. I was naturally aware that this was a biotech and the risk was some kind of stupid reverse merger or similar idiotic transaction. Nevertheless, this was an incredibly strong risk/reward and the stock didn´t do anything! I couldn´t do too much with my shitty internet on November 6, but I still have this:

I basically kept buying any form of weakness whatsoever. The stock drifted up slowly towards 2.30-2.50$ where I sold some shares because the position was becoming quite large. Then, the bombshell hit. In the worst way possible (No, I´m not talking about my daughter).

Realizing 5$ per share… for nobody!

Aadi then did some deals. I´m big on trading pre and after hours, because I am usually quick to analyze and interpret new information (not always right - but quick!). But these goddamn fffff….friends decided to release the news 2.5 hours after market close, which is past midnight for me. My newborn was 5 days old and I actually slept at the time and generally tried to not look at the market too much.

I did look in the morning though:

Would you look at that. I was awake now!

I could not have been more excited when I looked at the headlines:

Not only did they sell Fyarro for 100 million US$ (3.70$/share) or almost 4 times sales, they acquired some ADCs (which were somewhat hot at the time), got a PIPE done for 100 million US$ (in an otherwise already bad biotech tape) and found a decent CEO who has actually accomplished something in the past. That was in fact the only feasible way the stock could trade above its Fyarro + net cash-value! I read that on my phone stumbling into my office (right next to the bedroom). Fired up the IB TWS and continued reading. Sadly. Look at this disgusting pile of sh*t:

With at this time roughly 49 million US$ in net cash and the 100 million US$ for Fyarro (let´s call it 140), they had a pro forma book value of 5.17$ per share. In that same second, they turned around and issued 140% of shares out at 51% of book(!) to buy chinese ADCs years from the clinic.

I went through all of these I think:

Yeah. Fuck. FUCK!!!

I quickly searched if I could somehow get excited over these assets (I could not) while starting to sell the stock. Annoyingly, I already missed the largest part of the stock peak to I think almost 5$ on very decent volume the night before.

Congratz, you now own 3 chinese ADCs!

Suddenly, I did not own a niche oncology drug but a random collection of pre-clinical chinese assets with minimal data out - which tend to trade at large discounts to net cash. Surprisingly. Needless to say, I was quite bearish. Trading was thin and I had no idea how to sell really large amounts of quantity relative to liquidity to be honest. I became acquainted with the “accumulate/distribute” feature of IBKR, a good and dear friend by now:

I couldn´t even see the damn chart anymore. In hindsight, I probably would´ve received more if I had just immediately dumped the thing in 2-3 large blocks, but how would I know? Still don´t. How do you actually trade these things?

This is what the end result looked like 815 trades later:

To annoy me even more, the stock rallied to almost 4$ after that - for a short while at least (company rebranded to Whitehawk Therapeutics, WHWK) before dropping into the abyss:

But I was just very uncomfortable owning pre-clinical assets and knew how large the discount can become on these companies. I would do just the same again today.

But that also means, had management sold the company for 5 US$ per share, my proceeds would´ve been a cool 246,675 US$ higher and I would´ve probably shifted the profits to 2025, deferring taxes for one more year. I´m also having quite a year - that extra 250k would´ve been a timely addition of firepower.

Fuck. My. Life.

I mean, I still made quite a lot of money at the end, especially given the fact that I already took a very decent chunk of profits over the weeks and months before that final sell. But still: A lot of us are in this for “the game” and not so much for additional money (5-10% of my usual PnL would be more than enough to fund my lifestyle) and this was one of these situations, where I won. But I also feel like I lost more than I won somehow. Definitely lost a good part of what little naivety and goodwill towards managements was left. Thinking about the vast, collective value destruction from executives as of now to continue paying themselves 500k$ cash per year in the future still makes me angry (all about the patients, right?).

Have I ever mentioned that biotechs are horrible? I think I did. Why can´t I just buy Microsoft for god´s sake?

What do we learn from that?

Nothing of course as we continue gambling ;-). Okay maybe something:

Price is everything. Even with that horrible twist to the outcome, I made large gains on my initial entry (1.20$ → 3.05$) and very decent profits from where I built the majority of my position (around 2$). That was simply possible because I paid only ~2 times sales and got net cash and any optionality as a gift on top.

Discount everything! It would have been actually reasonable to pay 3-4$ per share for Aadi pre-deal. If management or the BoD were not borderline violating their fiduciary duties. The stock today trades at 1.81$ or 35% of the possible value created by a sale around 5.17$. Now - you say, what if Kaken (the buyer) wasn´t interested in acquiring the company? Well, their very first offer was exactly that:

Can someone please sue these guys?

Don´t trust anybody in biotech. We knew that before, didn´t we?

Everybody is wrong a lot. This situation is a perfect example, why trading and investing is more art than science. How to know beforehand that you´ll get screwed? Valuing the stock better or worse than the next person is one thing, but then you have to react to massively changing circumstances within minutes or hours and then be skilled at actually trading the thing and maximizing your exit somehow. Since none of you will be following me blindly in any idea and always do their own DD, I don´t have to tell you to rely on me in these situations ;-)

Buying shares is easy. Selling them when nobody wants to have them? Not so much! Baking size and liquidity into your risk assessment becomes important when you own more than ~50% of ADV.

You also kind of learn nothing from this. Nothing like contradicting yourself right at the end. Think about it: We have seen a decent amount of chinese in-licensing-deals that were well received by the market. Why they chose these assets out of all the late-stage-stuff available - I do not know. If they had done that right and the PIPE would-ve been at a fair value, the stock could have easily traded 6-7 $ on that. Also you will probably not be buying much if anything if you simply discount all calculations by 40%. You have to take some leaps of faith.

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What´s the next Aadi (for better or worse) in my book?

Looking at my portfolio and current ideas, there is two stocks sticking out where I think it is absolutely and totally obvious, that the inherent value of these companies exceeds the current stock price at least somewhat if not very materially. These are Repare Therapeutics (RPTX) and PureTech (PRTC.LN).

In both situations it is just as easy for management to create massive shareholder value (how much depends on some clinical readouts in both cases) as it is to destroy it with continued G&A or investments in debatable R&D projects.

The most annoying aspect of these governance clown shows is, how much shareholder value some executives destroy and how little they actually pull from that for themselves. If you look at the difference between 5.17$ and today´s Aadi price of 1.81$ and multiply it with the initial 27.04 mln shares out, 90.85 million US$ in shareholder value have been incinerated. How much of that is accruing to management and BoD? 5-10% over a couple of years? It´s banks, advisors, employees, CROs and lawyers actually profiting the most.

And in this case, the involved shareholders could´ve easily invested in the chinese ADCs and would have probably saved a ton of money if they did it via a freshly founded private company. They are throwing away 2-3 years of bloated PubCo G&A (easily a combined 25-50 million $) until initial clinical results for nothing but an annoying markdown in their portfolio and bad liquidity. Every executive involved could just be involved in that - I don´t envy them. Go get your salaries. Maybe just take the cash from people who actually want to give it to you?

How are the PIPE-shareholders so naive themselves? They jumped straight into the pool, filled with nothing but bloated costs, horrible governance and pre-clinical assets most investors don´t give a damn about (trading at negative EV of course).

Disclaimer: Long RPTX and PRTC.LN. Most definitely not long WHWK.

Even more random afterthoughts

• I might be wrong on the exact numbers regarding what a sale of the company to Kaken at 100 mln$ + net cash would´ve looked like. Doesn´t really matter.

• BML actually went activist and tried to cancel the deals. But large shareholders of Aadi participated in the financing, saw themselves as winners and of course voted for the transactions. They went through, BML had to dump. If they ever read this: Thanks for trying, still hope you screw those guys some day. EcoR1 also cut their position roughly in half.

  

• How was this not a super easy 10-minute lawsuit won before it´s filed?

• I hope these guys choke on their current losses. Yeah, if you buy yourself a cheap ticket through horrible governance, the market is not gonna reward it. Total shocker (unless you buy something sensible and durable like Dogecoin with the proceeds, of course). The same guys who force these offerings will probably complaining that their whole portfolio trades at large governance discounts. Yeah, guess why?

• The company might be interesting to revisit when their assets are approaching initial clinical data readouts. Maybe end of 2026 / mid 2027 story. Happy to buy some shares at 80 cents when the PIPE buyers dump them in tax loss season next year!

• Probably shouldn´t touch it though given management?

• Nothing is ever really safe in biotech.

• Was the first day for me where scale really became an issue. My SO had a (way smaller) position in her account and I just casually exited at 3.75$. Quite the slippage.

• I´m still mad 9 months after. If I ever get the chance to meet BML, beer´s on me.

• My daughter turned out way better than the goddamn stock!

Jokes aside, I like these from other authors as I can always find some ideas or setups I´m not aware of. I´ll bore you with some general takes and then there will be tickers and ideas involved, I promise!

The setup for biotech

Comparing XBI and BBC is quite interesting, as clinical companies underperformed massively:

Some thoughts, will dive into some of these deeper:

1. They are still in a multiyear-range.

2. Switching the composition of the XBI mid-2024 from clinicals into more pharma and larger biotechs helped performance a lot, as the performance difference vs. the equal-weighted ETF of (mostly) clinical companies (BBC) clearly shows.

3. The FDA seems to be fighting hard to keep up with deadlines. Lots of delays, but nothing unbearable so far. On the surface, things calmed down (ironically thanks to SRPT saga). Not great, not horrible.

4. MFN is still the elephant in the room. I personally think the underlying problem is way too nuanced for this admin to solve it, which might result in either nothing happening or absolutely ridicolous, idiotic measures with zero relation to reality or any common sense but completely outsized actions destroying the sector (anybody remembers trade deficit-weighted tariffs? Me neither). Somewhat ironic that the possibly largest volatility event of the year is actually ahead of us, but I personally don´t expect too much here.

5. Other than that, I think valuations are very constructive in a lot of biotech stocks. Even though I focus on special sits, I own surprisingly many actual biotech companies. I steal them all since I have no idea about these. If interested in reasonable, rational takes, check out Matthew Gamber with a heavy focus on commercial names (10 bucks/month! Still cannot believe it!) or Dan Rosenblum (his blog´s IT is from 1974 so beware). Important: I use them as a first filter and don´t follow them blindly.

6. I´d say I lean quite bullish for biotech for the rest of the year. With that said, I kind of hate the irrational environment in some pockets of the market, like DATs (How stupid are these? Everybody waiting 15 years to buy crypto and when they buy them at the top, they pay twice their worth price in a high cost shell with shady management. Cool). Valuations generally are pretty high unfortunately. Still, long biotech, expecting nothing and still ready to be disappointed. One “positive” thing for the time being might be that it feels like everybody is very bearish still (at least within my bubble). But gosh do I hate everything about this stupid market, don´t get me started (I promised I won´t!).

7. I am of course very interested in how the liquidation train of failed biotechs continues or if (when?) reverse mergers make a comeback.

8. I am closely watching CVR payouts, see yesterday´s note.

9. I made a lot of money buying strong data of decent companies AFTER their data release. CELC, ABVX, NKTR, CDTX are some examples. Hope there will be more of these.

Ticker rapid fire

I guess people want to read about stocks and ideas, so let´s just go - right after I remind you that I know nothing about biology and I am often trading expectations, valuations or sentiment and am very agile and ready to close or even reverse a position within 60 seconds. And no, I will not update you on all of these.

I know I made like 7 substack posts, but I actually usually own roughly 50-70 stocks + more in basket approaches. I´m doing quantity > quality today, here is my finest collection of trash in no particular order:

CTMX: Clinical biotech. This is a highly asymmetric stock, possibly owning a 3rd+ line treatment for CRC. Huge market with potentially lots of expansion potential. Initial data was strong in my opinion, raised 100 mln$ off of that. One patient recently died, though he only had one kidney? I will discount that and I think this will trade higher towards their readout in Q1 2026 as the market will discount that death as well. Stupid meme take here.

SPRO: Special sit. Back in small with an average of ~1.9$, see rationale here. No developments since that I am aware of.

YORK: Trashcan. Right after I complained about how stupid DATs are, here is the one I´m long. Didn´t even do the math on shares and whatnot as the people I want to sell this to will not either. Important is, that the SPAC already participates in token upside. The token doubled from YORKs entry, the stock is up 15%, it´s a SPAC, cannot lose much, can go up a lot. It´s a trashcan, don´t annoy me if it flops. It works before redemption deadline or not, r/r is strong imo. This is a giant pump of the underlying token (CRO) with heavy Trump-involvement (or his name at least).

LVTX: CVR-play. Very long into CVR distribution. Thin thing, not that cheap anymore but r/r is very asymmetrical. Rationale here. Stock was cheaper when I wrote this (1.41$).

PRTA: Special sit. Love it more than ever. Writeup here. Short-term catalysts are probably buyback announcement, more restructurings and maybe some monetizations already? Not sure.

RPTX: Special sit. Bought back aorund high 1.5x$. Rationale here. If I were sure that management looks out for shareholders, that stock would be an extremely safe bet. I am not though unfortunately. Lots of catalysts this year. Unless management does something stupid, these are all wins.

HLVX: CVR-play. Writeup here. Hope I get another bite near 2.05$. With KRON / IGMS paying more than expected, maybe I´m too conservative.

PRTC.LN: Special sit. Dipping right now into low 120s (GBp). X master thread. Waiting for new CEO / Chair. Think market dislikes their move to “strengthen UK listing”. I concur. If you´re a shareholder, tell them what you think. Tons of value, maybe they don´t piss it all away…

RTW.LN: Biotech-fund at a large discount to NAV. Small quick pitch here. One of my ways to express my biotech bullishness. Expect it to outperform either way.

ORR, AJOT.LN, NAVF.LN: Never really mentioned that. Am long these and lots of japanese companies trading at laughable valuations. All funds are some way to profit from japanese governance changes amidst cheap stocks with tons of assets. Lots of value, lots of value traps. Also like 9435.JP as a “fund-like investment” though I wish it was a touch cheaper.

FGEN: Special sit. About to close on their sale of the china-JV to Astra. Will have lots of net cash after closing, probably 28-32$ per share. Some data soon, not sure about their science. Has insider buys. X-thread here (most infos in “daughter-thread”).

BIOA: Net cash play. Pitched this at 3.11$ in April, feels like years ago. Still long, own less than back then. Have sold lots of puts, looking forward to expiry.

HOOK: Liquidation play. I own this teeny tiny, very tight. Writser wrote it up. Like this style, btw. We are all grown-ups, no need to explain every single piece of stuff in every article. Do some work yourselves.

TFG (Amsterdam): Stole this from Jeremy Raper. Speculation on a Ripple Labs IPO. He also did a great podcast on the japanese opportunity, couldn´t find the link. It´s great though (and really makes you question chasing biotechs burning their cash as fast as they can). I am obviously aware that this rests on XRP price and that it is worth probably zero. So kind of a late-cycle crypto-bull-market play.

IVVD: Blindly following ADAR1 into a CDTX-like anti-vaccine play.

VYNE: Illiquid! Think they get liquidated Tang- or XOMA-style and there is decent upside in it. Have a small position.

ATHA: Ongoing strategic alternatives. Small long. Not sure what to expect here. Perceptive is a large owner and I like that. Estimated net cash 0.55 per share as of today vs stock price 0.39. Small company, cash/share melts quickly! Will lose quite a lot if they just liquidate. Kind of expect a strong china-in-licensing. Assets are cheap, investors like that play and Perceptive has decent china-connections.

SYBX: Ongoing strategic alternatives. Some people-overlap with MEIP. Expensive on net cash alone. Small, illiquid. Hoping for a strong / stupid deal.

AQST: Pdufa-play, recently removed their financing overhang with strong investors. No idea why it trades so bad, you can buy it cheaper than lots of T1 investors did. PDUFA Jan 31 2026. Sublingual epinephrine. Maybe somewhat comparable to SPRY trading a lot more expensive.

Random collection of stuff I own but stole or don´t want to write about for different reasons: PTGX, ABVX, GERN, CELC, NERV, SEER, ROG (Roche, the big one), RVMD, TGTX, SRRK, BBIO, BBOT, IMVT, CRNX, XERS, ETNB, EOLS, CGON, AKRO, FBRX, NKTX, LNSR, GUTS.

Please be aware that sizing differs materially (usually based on downside). PRTA for example is more than 10 times as big as GUTS or 20 times as big as HOOK and that is before I factor in Short Puts. I generally trade a ton around these names and try to sell volatility where I think it is appropriate.

Oh and I have some decent hedges (my fearmongering post) on since everything is stupid as hell. Even though these are a lot of names for some people, I am actually having a large buffer. I´m maybe 50-70% invested (or net long) as usual.

The interesting thing about this unbelievable collection of questionable investments is, that a lot of these have very idiosyncratic catalysts in a reasonable amount of time - independant of the economy or politics. Probably less so for real biotechs, but I am usually not too concerned when they sell off for stupid reasons. (Remember when people sold down biotechs to 25% of net cash because regional banks were having problems? Yeah. Thanks for that.)

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Just wanted to try this format for a change (instead of writing up a single idea) and see what happens. This actually helps me, already have 2-4 names where I thought “Why do I own this” or “Why am I not bigger in these”. Maybe I´ll do that more often.

Expect that I am long all of these. This is obviously not financial advice. And just to state what should be very clear: These are not great or often even decent companies. They range from “trading sardines” over “might be even cheaper than it is crappy“ to “maybe the sucker liquidates before it goes broke” (RIP Charlie). Don´t ask me if I still hold them in 12 months.

Okay some companies might be somewhat decent, but they are for sure no Microsoft.

Be safe out there.

Quick summary for the impatient ones first:

• PRTA is a well capitalized biotech stock in basically a winddown.

• They own some semi-interesting assets themselves.

• Most importantly they have partnered - mainly - four programs to Big Pharma. Two of those are about to enter Phase-3-studies (by Roche and Novo) and carry absolute bangers of milestones and royalties in multi-billion-$ indications.

• Furthermore they have 2 important programs partnered to BMY.

• 2 studies probably read out in the coming months but the two big P3-studies will only read out in “2028+”.

• Any one of these programs will probably cover more than current EV after everything is wrapped up IF just advanced further (not even talking about eventual success via approval / marketing).

• The company announced its intention to soon return capital to shareholders.

• If it all lines up the stock can do a legit 20-30X and I will show you why. Just read the damn thing. Seriously, I think this is most definitely worth your time.

I published an update on PRTA. Read this article first though!

Some background to the company

What a stock. From rags to riches twice, dumped by Woodford in a forced liquidation into EcoR1-hands, just to be dumped again. After several years of ups and downs, Prothena is starting to close shop. Its focus on neurosciences has always fascinated investors from time to time, since the payoff for successful drug development in most neuro-indications is huge. That has a reason though: They almost always fail. All of them. All the time.

The latest hype happened in a hematology indication called AL amyloidosis. (Great time to remind you that I cannot tell the difference between a molecule and a protein am an idiot). That study read out in May 2025 and since you are on a dumpster-diving-blog, it obviously failed and spectacularly so. Important to notice that there is no overlap with the remaining pipeline. Speaking of:

Huge pipeline left

Even after all the failures, they have quite a pipeline to show for:

Before we talk about any of these, we will skip right to the money-slide:

At this point you should be salivating after realizing the company is trading at a market cap of 411 million US$ and will have ~326 million US$ in pro forma (!) net cash at yearend 2025, putting the EV at 85 million US$. (This includes an upcoming NVO milestone, more on that later).

Where does the company stand today?

In June, Prothena announced a large corporate restructuring cutting 63% of workforce. On August 4 2025, they announced their intention to not continue their sole left advanced wholly owned program (PRX012) on their own (“Following the data from the Phase 1 ASCENT clinical trials, Prothena expects to advance PRX012 through non-dilutive and capital efficient structures”).

They also announced their intent to return capital to shareholders:

So they want to return capital but since they are an irish company, they have to run through some weird administrative stuff first. Whatever. Most importantly, with (soon) no wholly owned program left and obligations to run studies for partners ending in 2026, I think Prothena has entered a complete winddown and will look to pass through payments from its partners over time. If you are familiar - I expect them to go full Merrimack. The market has neither fully understood nor priced these developments imo.

To value the stock, we will „simply“ have to do the following: Identify today´s portion of net cash that is available for distribution / buybacks and put a valuation or sensible range on each of the companies assets (or its partnered assets). One of these immediately had exciting news:

Only 2 days after its Q2 results, on August 6, Novo announced that they will advance their partnered program (Coramitug in ATTR-CM) into a Phase 3 program. Data from Phase 2 studies were not published yet so we have no idea if that is any good. But if NVO advances, it won´t be a complete shitshow. I guess?

Asset #1 - Prasinezumab

Speaking of shitshows: It was not expected at all that Roche will continue Prasinezumab into a Phase 3 program. That was the Phase 2b-data:

The treatment effect of Prasinezumab was very modest at best, occurred very late and to add insult to injury, these data contain patients from an open label extension, which you should probably just ignore. BUT I do not know anything enough to conclude that this might not make sense given the disease. PD progresses slowly (compared to cancer for example) and if the drug just slows future declines, modest and slow effects were to be expected? Looking at the positive side of things, these were the results in the official PR:

Usually I would be the first to hate on the subgroup. But it was pre-specified, it is 75% of participants and maybe there is a rationale for the drug to work better in these patients (taking another drug). Who knows (not me lol). If that signal is real and Roche simply scales up the study, we have an easy (statistical) winner? On further torture, the data confessed to being even better:

I suspect the Phase 3 program will cost Roche several hundred millions of US$ so they must be seeing at least something. Also - if you have an approved drug in a high unmet need indication like PD and nobody expects any meaningful improvement before 2 years, that sounds great for (recurring) sales. Roche expects “more than 3 billion US$” in sales if approved.

With double digit-royalties any success would be an insane value to PRTA in the billions of US$ (through milestones and especially royalties).

Will it work? „No idea“ is my guess for now. But if there is a 5/10/even 20% chance that it works? I know you want it so here´s the meme:

Well I am a probabilistic guy, the probability is not 0 so it´s worth..something? If you think the signal in the subgroup is real, we are talking a 11-14ish% blended royalty rate on 3-5 billion US$ of sales + milestones. This is probably about 3-5 billion US$ undiscounted/ non-risk-adjusted? If we put that into perspective versus a 80 million US$ EV, that means the stock is a buy if you think the probability of success is larger than 6-7% (including discounts for time) AND ignore all other assets. Pretty enticing at this point already if you ask me…

Roche itself is calling the Phase 3 program a “bigger swing”, so they are certainly aware that this is not a high PoS-venture:

But nevertheless they moved forward and have to see the study as NPV positive even given their high spend.

We also know that 290 million US$ of remaining milestones are tied to non-sales-targets:

It might be noteworthy that “development” is still cited as a milestone event, so there is a world where PRTA will get paid by Roche even if the drug is not successful / approved (“Full enrollment” / “Readout”). Not penciling in anything yet, but the risk to PRTA receiving anything here might be smaller than assumed.

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Asset #2 - Coramitug

NVO licensed the drug from PRTA in 2021 and just recently announced they will move it forward into Phase 3 studies. The ATTR-CM market is booming right now with Tafamidis, Attruby and Amvuttra all attracting patients quickly and already selling multiple billions of US$ a year (final market size estimates range from 12-20 billion US$).

Coramitug is intended to be used on top of (one of?) these therapies. I guess the worst part of this is that existing therapies are already pretty solid so the room for improvement seems limited, but - again - with NVO moving forward, data so far are hopefully not a total dud.

PRTA is expected to earn enrollment milestones in 2026, most likely 50 million US$ or 0.92 US$ per share. At this point, I would expect that payment to be practically a given. The drugs mentioned above all ran studies for 3 years, so that readout will probably be a 2029-story. Milestones are huge once again, if we assume 5-10% of the remaining payments to be a realistic NPV, we are talking 55-110 million US$ (excluding the 50 million US$ for enrollment).

It is also completely possible that there is another almost-guaranteed milestone (full enrollment or study completion e.g.) with high PoS involved which could quickly put 30-60 million US$ in NPV on top without material clinical risk. But we do not know.

In case you are counting, we now have a second asset covering almost all of the EV even with very modest assumptions of PoS. Strangely, there are zero royalties attached. Will look more closer into this asset if and when we know the Phase 3-design and the recent data.

Let´s move over to their assets with BMY:

Asset #3 - BMS-986446 in Alzheimers with BMY

Prothena did the Phase 1 for this drug (got paid 80 million US$ in advance) and then received 55 million US$ as an opt-in-fee in 2023. BMY progressed it into a large Phase 2-study reading out in 2027:

I don´t know anything about the split of milestones (or the asset itself). I like that recent progress is fresh (Opt-in in 2023) and that the asset is still included in the slides. Valuation wise, I think there is no return on deep work: It´s Alzheimers, it probably does not work, it is huge if it works and there is a decent probability that Prothena might earn more money on progress even if the drug is not eventually approved.

Value probably ranges from like 20 million US$ to several hundred millions or low single digit billions.

Asset #4 - PRX019 in TOP SECRET with BMY

To be honest I am almost intrigued the most by that program, because we don´t know anything and that is usually a blessing in biotech (why can´t I just buy MSFT…). BMY paid quite a handsome sum for rights to the asset even pre-Phase 1 and both companies are not publicly speaking about the indication or the mechanism of actions. That probably means chances are higher than usual that this program might be either a total dud or a complete rockstar. Let´s take a look at the small print:

BMY paid 80 mln US$ in 2024 on basically pre-Phase-1-data - not too shabby and certainly on the very large end of things regarding assets before clinical data is available. 242 million US$ in pre-commercial milestones and 375 million US$ in commercial milestones are not bad, but in comparison to the large upfront rather small. Some royalties on top.

Since I assume deal numbers to be identical to BMS-986446, the opt-in-fee is probably the same as well: 55 million US$ (ridiculous how quickly this could cover more than half of EV…)

Other than that we know absolutely zilch about this, we can roll the dice on some probabilities and DCF ourselves to death, or we call this a “4% on pre-commercial milestones + 1% on commercial milestones”-thingy because hey - why not?

That would give us a 10 million US$ random bullshit valuation. Once again, mostly optionality but just with probability of 20-40% that this moves forward and pays 55 million US$, it´s worth quite some $.

I think a range of 10-80 million US$ in NPV is reasonable, but since we do not even know the indication, there isn´t much work to be done here anyway. Just trying to “box” it and put it in a reasonable frame.

Asset #5- PRX012 in Alzheimers (wholly owned)

Alright, let´s just call it a dud. We will know results very soon and I see no reason to dive deep into this before results are released in August anyway. The stock is cheap without PRX012 so we will treat any positive developments as gravy on top.

Given the track record of PRTA to partner out their assets at decent terms to Tier 1-partners, any positive developments could be quite material. I will probably buy any material weakness in the stock on bad results.

Asset #6 - PRX123 in Alzheimers (what else?)

Usually I´d say since this is pre-clinical, we just put it at zero. Given what PRTA has received on pre-clinical assets so far, a material payday could materialize anyway. Let´s just treat it as a call-option anyway.

Asset #7 - Net cash

The beautiful words my whole biotech-portfolio runs on. Including the 50 million US$ payment coming from Novo, pro-forma net cash as of yearend 2025 should be around 326 million US$. I expect them to have a bit of an increased burn in H1 2026 since they need to wrap up the PRX019 Phase 1-study (that is really cheap though). But look at their R&D expenses, PRX019 is really not costing much:

Birtamimab failed and PRX012 is about to post results in August, so by 2026 these ongoing costs should be eliminated completely. After wrapping up PRX019 they basically need to only monitor their assets and distribute cash. Merrimack managed to do that with ~550k US$ a quarter. Let´s say Prothena will burn 20 million US$ in 2026 and 5 million thereafter until end of 2032 for a total of 50 million US$. That leaves 276 million US$ or 5.12 US$ per share in net cash available for distribution or buybacks.

Putting all of it together

Now we have several assets with several scenarios. In that case I like to work with tables like these (These are all heavily discounted NPV estimates, the actual outcome if one of these drugs excels is way stronger):

Of course there are dozens of “mixed outcomes”, but it´s a nice way to frame things and probably way more useful than torturing a DCF model until the outcome is what I wanted to see :)

The table still feels kind of useless tbh - it is just incredibly hard to pinpoint NPV on these low/medium probability / high impact-assets. In my table, the Prasinezumab NPV jumps probably fivefold or more even in the bull case on positive results.

Now with these scenarios already looking juicy, let´s do something fun. Let´s assume Prothena puts out a 250 million US$ buyback and executes that between now and 2028. We all know there will be probably 3-5 extreme sell-offs in biotech until then, but let´s assume they buy back 30.30 million shares for an average of 8.25 US$.

Suddenly, this table looks very different:

That buyback will also stabilize the share price and decrease market risk, especially if the firepower is truly such a large portion of the market cap. Remember, these numbers are not incorporating actual success. Prasinezumab would back a triple digit share price on a reduced share count if successful.

That seems insanely high partially, but think about: If Prasinezumab were to read out tomorrow with a potential 3-5 billion US$ valuation on success, would a 500 million US$ valuation (EV not market cap!) or an implied PoS of 10-16% be insane?

My mindset for the stock

I feel like the nature of the assets and the relatively large unknowns (What triggers which milestone payments? What does PRX019 even do?) make it really hard to put any sensible valuation on this thing. My personal mindset is as follows:

I expect net cash and all assets except Prasinezumab to cover somewhere between 60-150% of today´s valuation and that is probably very conservative as it implies no successes but just slight progress / small milestone payments on these other assets. That is a very decent box I would say for what will end up being the mother of all call options, when Prasinezumab (even Coramitug at current EV) finally reads out. If the buyback is completed as thought, a Prasinezumab success valued at let´s just say 3 billion US$ will be worth 127.52 US$ a share. If and when that readout approaches, people will see that the subgroups “worked”. Do we really think PRTA runs into that readout at 7.50 US$ a share? I don´t.

The biggest question for me is: Do I need to own the stock in size today? Or can I wait? Or do I own it in size today and reduce it when the company starts the buyback and the stock rises? The most negative thing about the stock would probably be that it will trade very weak on near-term biotech-selloffs, since there are little short-term catalysts - or at least not “the big one” - in sight.

What trades I put on

There is a couple things I did: I sold(!) a truck load of December 5 Puts. As long as your personal return on margin is attractive, these are a maximum position for me (boy is this not financial advice!). But at least for now and pre-buyback, that seems a very safe trade (breakeven below pro forma net cash), doesn´t it?

I also sold a lot of December 7.5 Puts for ~1.25 US$ a share which works out to an extremely attractive effective purchase price of 6.25 US$ if assigned.

I do actually and additionally own a large position in commons, but also have sold some Calls with 7.5 and 10 $ Strikes expiring this year. It´s a pretty structured position. I do want to maintain significant upside for now, but also want to make sure I´m not left yieldless if it treads water for a while. But if this moves down, it will hurt.

I think it is a great stock to trade over the coming years, as biotech happily gyrates from hype little despair to lots of despair. Even if you buy it today and simply sell it into an eventual hype as the Prasinezumab readout approaches, I wouldn´t be surprised if the stock returns 50-200% (depends a lot on buyback) in 3-4 years on basically nothing but time passing. How, if and when “the big unknowns” PRX019, PRX012 and PRX123 are monetized will actually be important and we will just have to wait for that to happen.

Trading wise there is a ton that could happen. If NVO hypes Coramitug or if there are new papers showing Prasinezumab might have a bigger chance than suspected, the stock can easily do 50-100% at basically every point in time. A lot of that in turn depends on how and when the buyback is implemented. I also hopes this dips on a PRX012 fail (which nobody really cares about).

Disclaimer: Nothing on this blog is investing or financial advice, do your own DD. I do have a large beneficial long position in PRTA as of writing.

Additional thoughts

• As can be seen in the last paragraph, I don´t think that there is “the thing” to do here. Timelines are partially long and imo it is vitally important that a shareholder / put seller is simply up to speed and knows how to react when certain things happen (costs being higher than expected, assets failing, assets being sold / advanced etc.).

• Lots of the value is often actually in speed. Should PRX012 fail, there is a decent probability some idiot summons himself onto the trading floor and dumps the stock. These are the situations where you have to be ready and pick up free money, especially as a “sub scale retail investor”. If you are not prepared, you will end up being the scared monkey giving away money.

• Do not underestimate how strongly perception can change. From “get me out of this, this moves nowhere for quarters” to “omg did that paper really just drop” and 4$ or 20$ respectively can take 6 months in biotech and I wouldn´t be surprised if both happen. Multiple times.

• I am intrigued on how they will return capital, buying back half of shares outstanding probably won´t be easy. But there are a lot of holders involved who will probably have to sell if they just pass through royalties? Passive capital owns huge blocks and I am looking forward to Blackrock, Fidelity and the likes dumping their shares on some random index reshuffle or tax loss event.

• This could really be an insane performer. If it all lines up (cheap buybacks into a string of payments into more cheap buybacks into a Prasinezumab success) the stock can do a legit 20-30X. That in and of itself has a very decent optionality value you will find very rarely. And if you find it, for sure not on Phase 3-studies being run by two of the largest pharmaceutical companies in the world.

• There is a lot of work to do for me especially for Prasinezumab and Coramitug as these are the large drivers. More so I need to dive deeper into Alzheimer-assets, but I wanted to put this out before anything material happens. There will be tons of moving parts anyway. I am pretty sure this is only Part 1 of PRTA which will be a multi-year saga.

• Passive capital might become a meaningful seller if PRTA is not an active company / does even downlist / compresses the free float and market cap via buyback?

• The price where they execute a buyback is obviously one important element for what an eventual outcome will look like!

• Fingers crossed.

Usually I don´t expect to necessarily keep my ideas updated on here (incremental stuff happens on X) but I think this is interesting - and most certainly serves as a lesson. When I initially wrote up Spero (I will assume you read that, otherwise this post is not for you), I started bullish and got quite neutral while writing, with my conclusion being that it is most important to simply keep an eye on the situation. That turned out to be correct. The stock initially rallied to 3 US$ (where I sold the majority of my position less a tracker) and then dropped all the way to now ~2.15 US$ in US pre-market.

Some horrible updates

Reporting pain from:

• Net royalty rate.

• Milestone payments.

We suffered from several unknowns in the past. Spero decided to shed some light on some very important number: The royalty they have to pay to Meiji for Tebipenem and the royalty they get from GSK.

One of my main risks was that between the “single digit royalty” receivable from GSK and the “single digit royalty” payable to Meiji would not be a lot of room. Yeah:

The net royalty rate for the first 750 million US$ of sales is a whopping 0%. Think that´s a first for me.

And then there is ANOTHER first:

The milestone payment for the first sale(s) receivable by Spero has been reduced, because the trial was terminated early for efficacy. Yeah, you read that right. Spero gets less money because the drug works better than expected.

With a reduction from 150 to 101 million US$, that reduction was very material. At least Spero decided to tell us the exact split of the outstanding non-sales milestones:

I´d say that the EU/US-split is about as expected. I based my initial calculations on a ~73/27 split and we are looking at 76/25. My uselessness does not seem to be unlimited at least ;-)

Sprinkling in some good news

There were some pieces of good stuff hidden in that large pile of sh*t. First of all, Spero expects its current cash (pro forma ~55 million US$ as of June 30 including a payment received from GSK in August) to last into 2028. That´s great as it implies a very low burn rate (roughly 4 million US$ per quarter if calculated linearly).

Another nugget dropped on the conference call (the script is bad, sorry):

A couple of thoughts:

• If you ever wondered if you ought to shutdown your company and are looking for signs - being asked a single question by Evercore on your conference call is it!

• The CEO clearly defined Tebipenem as the “real value driver” going forward and NOT “IV720”

• A decision will be taken near Tebipenem approval, which is expected ~mid 2026.

I come along pretty full of hate here and I partially am. The deal terms were horrible and only topped by even more horrible disclosures (which is why I´m salty). Horrible stuff happens all the time, but burying them in presentations / filings is not helpful. It´s not like nobody is gonna find out.

I reacted strongly last night on X, dumped my tracker - and bought it back right this morning because I´m a monkey and an addict. While the developments are not what I wanted to see and the road to a 5$-stock is most likely VERY closed, we gained a lot of clarity at least and can pinpoint a value-distribution more closely.

Putting the numbers in Excel

Some housecleaning - lots of RSUs got cancelled so the fully diluted share count actually dropped.

No options granted in H1 2025 as well.

Milestones and net cash

Let´s start with the easy part, the remaining non-sales milestones:

I realize I am aggressive on these probabilities but we have a Phase 3 terminated early for efficacy in a study done under a SPA with the FDA. If there ever was a home-run, that should be it?

I excluded EU completely in the sums but just wanted to quickly show it anyway. Neither GSK nor Spero have talked at all about ex-US so it is probably best to ignore. Still not too bad compared to the stock price, no?

Given the fresh comments on burn, I expect Spero to own about 0.47 US$ per share in net cash as of mid-2026 (might be a bit less if costs are higher short term and then drop even lower long-term but whatever). Still - this is 1.83 US$ per share taken together already. And it is probably safeish to assume there is no more bad news to drop here? Please?

The “noyalty-stream”

Now switching over to the bad news part. The royalty stream is obviously worth a lot less IF YOU DON´T EARN ANY ROYALTIES!?!??? Still having trouble working through the logic here mentally, in case you did not notice. This is a great opportunity to highlight the book the very man wrote who signed this:

I am doing biotech almost exclusively for roughly 10 years now and it never gets boring.

I updated my legacy table on sales with simply milestones remaining:

This is clearly a story on these milestone payments now:

Now, I still think my assumptions regarding sales from the initial article hold up. This is GSK on their most recent earnings call from July 30:

So even with Tebipenem only being a part of that portfolio, the implied GSK-guidance might be higher than what I am assuming. This is pretty important, as the 500 and 750 million US$ annual sales point could bring a decent uplift in NPV through the larger milestones attached (and royalties returning above 750 million US$). A 50 million US$ milestone in 2036 and another one in 2037 would almost double the milestone-NPV to 1.08 US$ per share.

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Summarizing Tebipenem-valuation

Now let´s assume Spero prepares a royalty-deal / buyout / whatever but waits for approval to capture full value. This would roughly be my view on value per share:

Low-case in Royalty stream only assumes the 250-milestone to be paid. Let´s update the table for the stock in total:

That´s not… horrible? If I re-allocate “dumb shit” to the mid-case, I am landing at ~2.40 US$ per share. I think it is actually reasonable to assume that the probability that the company goes all-in on “IV720” dropped materially given the comments on the conference call. They mentioned 720 just briefly and their assessment of data is now complete:

The assessment of the full data set of all 25 patients dosed in the trial is now complete, and we are currently determining the next steps for the program.

The company allocating its cash toward IV720 is still the most likely worst case where the stock might drop materially.

On the other hand, 720 and maybe even 206 (see initial article / “Additional thoughts”) could bring in some $ if transacted. I would even be happy if they pay someone 2 million US$ to take 720, as they will not be investing in it themselves. Given the deal history of Tebipenem, I wouldn´t even be surprised if that happened…

If they sell all Tebipenem rights, dividend out the cash and monetize the shell, realized value could be even higher than solely Tebipenem even without additional asset sales. My valuation also does not include the optionality for sales going to 500-1.000 million US$ at peak, triggering large milestone payments + decent royalties.

Conclusion

Unless the company does stupid things, the risk-reward in the low 2s looks actually decent? 2.20 US$ is a touch too high for me to rebuild a position, but I think I will be a buyer on weakness from here. Structuring this as a covered call might be very sensible as well, giving you an effective purchase price below net cash mid 2026 + non-sales milestones while retaining decent upside to 2.50 US$. Let´s see what Mr. Market has to offer in the coming months.

I remain highly convinced that it will pay to stay involved and informed on this one.

Disclaimer: Nothing on this blog is investing or financial advice, do your own DD. I do have a beneficial long position in SPRO as of writing.

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• HLVX is a broken biotech being taken over for roughly net cash.

• The CVR is trading around 10-12 Cents.

• In my opinion it is worth 15 cents at bare minimum (WOW such return) but provides a nice call option on top with a somewhat credible buyer that is NOT Kevin Tang.

• Clinical vaccine assets are totally out of favor currently with an anti-vaxxer at the helm of HHS. That made it impossible to fund planned developments, but could actually fetch a price down the road when MAGAs rule on HHS might end.

• HLVX offers a nice return in my opinion if bought with discipline at the right price and you get a very decent call-option on top which might or might not pay.

Background to HilleVax

HLVX is one of special sits with lots of questionmarks. I initially bought a ton of shares on the data-dip (when their lead asset failed) below 1.50$ in 2024 and traded the stock on and off since. At that time, they had 4$ or a touch more in net cash. So I want to start with shaming management into wasting HALF(!) of the companies assets or a staggering 100 million US$ on absolutely nothing. They have zero to show for and needed 1 year to “kind-of-liquidate”. If you ever needed a reason to not invest in biotech, this is it.

100 million US$! I see that sh*t everyday but still am amazed anew every week I do this. The sums waisted in this sector are an atrocity.

What probably happened is, that the company initally planned to purse its other vaccine-assets further and then RFK Jr. happened and the company staid in denial for 6 more months before finally accepting reality. Even in May 2025, they still stated that:

The company is exploring the potential for continued development of its norovirus vaccine candidates in adults as well as business development related activities and other strategic alternatives.

Yeah. No.

The transaction with XOMA

As is almost customary right now, HLVX decided to sell itself to XOMA for about net cash with a CVR. The structure of the CVR is as follows (from merger 8-K edited for clarity):

(1) 90% of any net proceeds received by Parent within five years following regulatory approval from any disposition of any and all remaining norovirus vaccine programs of the Company if such disposition or a financing of such program occurs within two years following the closing of the Merger.

(2) between 90% and 100% of certain savings realized by Parent following the closing of the Merger on the obligations under the “Harrison lease” regarding the premises on the fifth floor of the building known as 321 Harrison Avenue, Boston, including the net proceeds received from any sublease of the premises (which will also include the Sublease (as defined below)).

(3) the excess or shortfall, if any, of the final net cash as calculated 90 days following the closing of the Merger pursuant to the CVR Agreement over or under $102.95 million.

I will build my case on mainly (2) and hope for the best on (1) and (3) as I will - if I am correct - not pay for (1) anyway. Let´s have a look if we find some money lying around:

Looking at closing net cash

If you look at the closing net cash hurdle for the CVR of 102.95 million US$ and compare that to the balance sheet, you will intially be somewhat confused:

At first glance, the company appears to own more than 130 million US$ in net cash as of end of June and the quarterly burn of ~ 6ish million US$ until closing does not explain the vast difference. Are we looking at a huge payment from (3)?

Lets take one step back. XOMA offers 1.95$ per share which works out to 97.77 million US$ on the last sharecount. Factor in some minimal dilution, it is probably going to bei 97.95 million US$ which in turn means, XOMA gets paid 5 million US$ for the liquidation (102.95-97.95). IF(!) both parties agreed to that sum, it would probably make the most sense to structure the net cash sweep in the money which would provide the easiest handling. I think?!

Let´s head back to net cash. With a touch more than 6 million US$ in Q3 burn and an estimated 5 million US$ of costs for closing down (total of 11 for D&O insurance, severances, banker pay, ongoing cost) we arrive at a 11.22 million US$ net cash excess if we assume lease liabilities at their undiscounted sum of 30.6 million US$. Still plenty of room and looks very enticing, no?

This is where experience joins the game. Something strange happened at Kronos (a similar situation I covered here). When they terminated lease liabilites of ~30 million US$ for 20.5 million US$, they generated savings of - you sure as hell did not guess it - 18.2 million US$. My first reaction amounted to roughly THAT:

But it all makes sense. While the company capitalizes its direct lease obligation on the balance sheet, these usually do not contain e.g. “common area maintenance, property taxes, insurance, utilities, janitorial services and other administrative fees” which means liabilities are higher than they seem. Since none of these plays actually publish the net cash schedule on which all these mergers are based upon (wtf but different story), we can only take educated guesses.

So I did the only sensible thing: I checked, how many years were left on the Kronos lease, how many sqft that property had and how high the savings were in excess over the undiscounted lease per sqft per year. I landed at around 38.67ish US$ (math it out yourself or trust me). Extrapolating this number to the HLVX-Lease gives me 9.15 mln US$ in additional costs over the term of the lease (until end of 2032) and the net cash sweep melts down to 2.07 million US$ or 4 cents a share.

Have I mentioned the absurd amount of money yet that biotechs burn on nothing?

I think there is some room for a higher closing net cash since the transaction should close a bit sooner than end of Q3 (mid of September probably) and burn for Q3 should be smaller than Q2, but there is also potential for more unpleasant surprises so I think it is safe to call the net cash sweep a zeroish. They also show 2.2 million US$ in “prepaid expenses” and 0.465 million US$ in “Assets held for sale” which will be added to closing net cash (security deposit for lease will not be added).

So while I think there is potential for a 0.5 to 5 million US$ payment (1 to 10 cents a share) it is very hard to estimate. Let´s put that thought to the side and look at the “savings” part of the CVR.

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Show me the money: payments from savings

If the closing net cash disappoints, there is a positive element. If actual costs after closing are lower than estimated, these $ return to shareholders. I expect these figures to consist mostly of lease payments and excess costs described above, which makes for a total pool of roughly 39.5 million US$ or 0.79$ per share (plus other smaller costs but the majority will be won or lost here).

Now we also have some information about a sublease, which happened at the end of July (see merger 8k linked above). Hillevax subleased a large part of its floor to Stelaaromics, a company already leasing the floor above. This is how it looks like:

This is a substantial discount to the amount HLVX pays (120-130 $ per sq ft I guess). But still, it´s something. That sublease runs for 3 years and 2 months. The floor plan attached shoes that the total zone for freshly cashed up Stellaromics (just completed a 80 million US$ funding round) will expa

nd to ~75ish percent of the space. They committed to paying 61.6% of excess costs, so we have have quite some payments in addition to the lease.

At this point we can do some quick calculations for the savings-CVR:

Discount rate is 10%, I ignored the 2 months included and the date for payment is as lazily chosen as is formatting ;-)

So, if my assumptions (especially regarding the “bridge” from Kronos to Hillevax lease) are correct, the stock is worth ~2.05 US$ (ignoring some tiny discounting for the 5-6 weeks until closing) per share. And that is with 4 years of lease left un-leased for the Stellaromics part AND probably around 6,511 sqft remaining in total.

If these are subleased as well at 75$ per sqft flat and ~30% of excess costs are allocated, the sublease income would amount to 859,564 US$ a year. If that were to happen, the NPV10 would equate to 4.49 million US$ or 8.94 US-cents per CVR.

There might be a decent probability that Stellaromics will expand to that space in 3 years. I think it is rather unreasonable to expect this value to be generated in total, but it is also unlikely that zero value will be generated.

Let´s do something fun. Let´s assume Stellaromics will continue to lease throughout the whole term until end of 2032 AND sublease the additional space from 2029 (which will sit empty until then). The price per sqft will stay at 79.04$. Total NPV of that scenario would equate to 14 million US$ or 27.89 Cents per CVR. Which is not unrealistic at all I would guess?

At this point we would also expect that the complete lease will turn over to Stellaromics, XOMA will pay a one-off-payment to the landlord and the whole thing will be terminated and cashed-out in 2029 which will probably add additional NPV.

Oh and the company put down 1.6 million US$ as a security deposit which might or might not be returned at some point. If they are paid out in 2033 (without interest, which would be included) it would represent an NPV10 of 1.45 US-cents per CVR. Maybe yes, maybe no - nice optionality to have.

Payments from assets

With RFK Jr. in the game, vaccines will undoubtedly have a hard time. But we can receive payments for up to 5 years and I think it is not completely unreasonable to assume, that in a world without RFK, some milestone payments might hit the CVR.

The remaining asset (HL-214 was returned to Takeda) was in-licensed in 2024 for 15 million US$ upfront.

The unmet need is there and I think it is not completely unimaginable that somebody will buy it and put it on the shelf to initiate further studies on an administrative change or RFK leave/death/worm-incident. In that scenario the main issue will be that the real value-creating milestones might happen outside of the 5-year-timeframe, but since we are probably paying zero for that part (or depending on how much you trust my lease-analysis we get paid to own that call-option) anyway, I don´t really care.

Each 5 million US$ gives ~8.9 US-cents (since we receive 90% of that). You tell me if it is unreasonable to think that somebody pays 5 million US$ for the asset and a further 5 million US$ on initiating a clinical study.

There might be other IP or assets I overlooked, sometimes biotechs own more than they publicly show. Would not expect that to be the case here as there is no real “discovery-engine” behind the company.

Putting it together

I think FOR NOW(!) most of the value resides in cost-savings from the sublease of the Harrison-Lease. With the payments already to be received by Stellaromics, at a 2.07$ ask the stock prices only minimal further sublease-success which I think is rather unlikely.

I think the boring part here is that you are probably not going to make many multiples of your money. Even though it is entirely possible, it is extremely unlikely that the remaining asset puts out any huge payments in short order.

Still, I would put the CVR at 20-30 US-cents just as of today, mentally allocating 80-90% of value to the optionality around further lease-agreements, with or without Stellaromics.

Unless I am completely unaware of some risks, this looks like risking maybe 2 cents (if at all) to make 15-20. It will most likely not be the investment you will still tell your grandchildren about, but this looks like possibly a nice, clean win.

The CVR payments will be reduced by some costs (pretty customary) which might be a drag of maybe 2-4 US-cents (implying 1-2 million US$ in costs over the lifetime). Given the economics around the Harrison-Lease, I think this is very acceptable. These cost-clauses usually become a problem, if the payments receivable in total are very small.

All in all, I like the CVR here (2.07 US$ for the stock) and love it if HLVX would drop a touch closer to 2 US$. The tender offer will be initiated soon, I expect closing around September 12.

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Disclaimer: Nothing on this blog is investing or financial advice, do your own DD. I do have a beneficial long position in HLVX as of writing.

Additional thoughts

• If excess closing net cash is negative, these amounts have to be recovered first. But I think it does not really matter, as closing net cash will only be negative if cost assumptions for the future are very high. That in return would increase the pool for future cost-savings-payments, if and when these cost assumptions turn out too high.

• XOMA paid out high end of net cash for Kinnate in a similar transaction (closing net cash might actually pay some here) and also transacted all of their assets in an attractive deal with at least high headline numbers. Unlike Kevin Tang, they seem to be not sleeping at the beach during the monetization period of assets.

• They also stated in the past in interviews (Biotech TV interview - shoutout to Brad, awesome stuff) and conference calls that they are mainly interested in these deals if the assets are promising, so I might be completely underestimating the true value drive, which might surprisingly be the norovirus-asset? Very open to surprises ;-)

• CVR payments from sublease income decline to 90% if the agreement is entered into 12 months after closing. I think I introduced enough conservatism (no increase in sqft e.g.) in my calculations to just ignore the step-down. But otherwise it doesn´t take any rocket science to just distract 10% of all payments in excess of the existing Stellaromics lease so just do that if you want to feel safer.

• The payments from sublease savings are paid out when they reach 500k US$ so the CVR should pay out regularly.

• My calculations assume 50.2 million CVRs.

• Happy to hear additional elements I overlooked.

• IKNA is a “failed” biotech (still has some assets left) which went looking for strategic alternatives.

• Company entered into a reverse merger with private immunology company Inmagene. It´s not that bad of a transaction on the surface, but 45% of the register voted against it. They will still proceed.

• There is quite a large PIPE being done in connection with the merger at ~2.38$ per IKNA share with very respectable names involved.

• IKNA shareholders will receive a CVR for legacy assets and we actually already know some of the deals, which are - at least from a nominal point of view - very large.

• A stock trading at 55%(!) of a large PIPE with a possibly huge CVR attached - while having 17 million shares potentially against the merger (35% of SO) and lurking in the ask looks quite attractive on the surface. Let´s see if that holds up to scrutiny.

A look at the CVR - or CVR² in this case

Some housekeeping first: The CVR runs for 10 years (can potentially even be extended). Holders will receive 100% of all payments if a disposition agreement has been enterd into before merger closing and 90% if it happens within 1 year of closing. After that, CVR holders lose any claim on the asset.

I don´t think I have ever seen a constellation like this, but interestingly IKNA itself merged with Pionyr roughly 2 years ago. That transaction was basically a capital raise for IKNA. Pionyr shareholders got IKNA shares, IKNA collected a touch over 40 million US$ in cash and Pionyr shareholders received a CVR FROM IKNA granting them 50% of disposition proceeds within the next two years.

The remaining 50% of these Pionyr assets will now find their way into the IKNA CVR, apart from the actual IKNA legacy assets.

Specifically, the following programs are included:

Monetizations so far

Interestingly, IKNA management has not been idle and already reached agreements for the following assets:

The bombshell: The Pionyr assets have been “sold” without upfront in December 24 and IKNA is eligible to receive a whopping 1 billion US$ + royalties + proceeds from “future strategic transactions”. I expect 50% of that to go to Pionyr CVR holders, but still - 500 million US$ is ~10.36$ per share (guess will be a bit less per CVR after dilution via RSUs / options etc. but whatever). I am pretty sure IKNA would trade differently if they would put out that number.

IK-175 is gone for 0.4 mln US$ (yay). Preclinical stuff is gone for 1.5 million US$ (there is somehow always some money in these assets unless Kevin Tang monetizes them…). I don´t know if I misunderstand, but these payments (1.9 mln US$) should go into the CVR. It´s 3.9 cents gross so no reason to get all wet, but it´s something? With CVRs often being able to deduct some costs, I wouldn´t put too much on this though tbh.

IK-412 was “sold” to University of Texas and Ikna is “eligible to receive a portion of UT’s milestone payments or license fees generated from the assigned intellectual property, together with UT’s other intellectual property related to IK-412”. BMY passed on opting-in into this program, so we can probably call this close to a zero or maybe there will be coming some single-digit-millions our way with low PoS. Copium interpretation would be, that it was originally Celgene buying into the asset so BMY´s disinterest might be grounded in non-scientific facts, but… Yeah, let´s call it a zero.

That leaves IK-930 and IK-595. Disappointing IK-930 data has been the reason for the IKNA shutdown, so I would argue that´s close to a zero.

IK-595 “is a molecular glue designed to trap MEK and all three RAF isoforms in an inactive complex to more completely inhibit RAS signals than existing pathway inhibitors”. Welp. That is the point in time to remind you that I have near-zero scientific knowledge of … anything biotech. With that said, the compound has been in a Phase-1 dose-escalation-trials (clinicaltrials.org) with 51 participants across several different cancers, so that could become quite the data package. Importantly, the fact that the asset has not been partnered is probably more a function of waiting for mature data than just blatant disinterest (completely possible as well).

What might that basket be worth?

Where does that leave us? Think it is really hard to put any number on this CVR, as details are unknown. One major caveat in my eyes is, that the Pionyr-Assets do not mention development-milestones (only regulatory or commercial), so there could very well be absolutely no payment, since approval or NDA acceptance (usually the first “regulatory milestones”) is obviously a high hurdle to clear. Nevertheless, if the licensor sells the assets before that, there could be payments earlier than that. Still, we should consider that to be a very OTM option and I´d guess it is sensible to value that somewhere between 0.5 and 2% (2.5 to 10 million$) of “face value”.

Even though the Pionyr-assets have that large price tag on them, given their “out of the money”-nature, I´d argue it is sensible to assume that IK-595 might be a more probable driver of a near-term-payment for the CVR.

Bottom line: I actually think the CVR is quite an attractive call-option “worth” somewhere between 2.5 and 12 million US$ - but highly probabilistic. Personally as a CVR afficionado, I have an urge to own this for its random nature and the CVR within the CVR which makes me look very smart if it pays off ;-) . In my experience, there is luckily near-zero interest for CVRs in reverse mergers.

Unfortunately, we have to assume that the annoying stock attached to it might be a bigger driver of returns. Which brings us to…

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Taking a look at Inmagene

What does the market think about Inmagene right now?

In connection with the merger, strong biotech institutions are putting in 75 million US$ at ~2.38$. With the stock at 1.30$, we are looking at a whopping 45% discount. The Enterprise Value of NewCo should hover somewhere between 5-15 million US$ at this point. That is incredibly low for a company backed by “Deep Track Capital, Foresite Capital, RTW Investments, and existing Ikena investors such as BVF Partners L.P., Blue Owl Healthcare Opportunities, Omega Funds, and OrbiMed”. If you´re unfamiliar, that´s pretty much a Tier1 investor base (already looking forward to at least one random person calling me out because he thinks at least one of these is certainly no T1 because they declined his application). More on that later.

The merger was almost voted down (a rarity):

This leaves the stock in a VERY awkward position. There is 17 million shares who are looking at the exit - these holders wanted the company to liquidate for 1,90$ - 2,10$ per share (+ asset payments). BML would be one of these:

Of course we don´t know if these are immediate sellers, wait for the CVR or are looking for an exit closer to 60-80% of the PIPE-price. That would be it from a technical perspective I think, let´s have a look at what Inmagene actually does!

Immunology play with an OX40 mAb

Let´s not pretend that I do care what an OX40 does. Inmagene is far from the first to research the mechanism - and it probably works. The thing is - it doesn´t work exceptionally well. So far - especially compared with market leader Dupixent. Here is some background on the leading compound, rocatinlimab (Amgen).

BUT it is potentially usable in a wide variety of immunology-markets and these are HUGE. There has been a lot of discussion lately over Nektar and how good results have to be in Atopic Dermatits (AD). See here for some of Adam May´s work for example (there´s more from him and others, the whole NKTR-debate should be relevant for Inmagene as well). Think it is quite reasonable to assume that another mechanism of action will have its place, even if only within Dupi-non-responders.

How does Inmagene fit into the AD-space as of now? ChatGPT:

These results have been published AFTER the merger agreement was signed. They look strong, why is the market hating on these data? Several caveats: It was only 13 patients and they received the drug intravenously, which is usually the most effective, but most uncomfortable and logistically expensive way (patient has to come in) to deliver a drug. Going forward, Inmagene will have to position a SC-variation and we might just see efficacy drop. Importantly, the long half-life of the drug and what seems to be a very decent safety-profile could be meaningful differentiators, if efficacy holds up or is at least in line with rocatinlimab.

One more issue is, that we have seen some incredibly high placebo responses in AD. Poster child is probably Q32, who showed an absolutely astonishing 76% placebo-response in EASI-reduction.

Since then, the market is having a very hard time (understandingly so) putting any value whatsoever on open-label-data (such as Inmagene´s). I´d argue though that it might be resonable to “believe” in Inmagene´s data as the mechanism is pretty much validated by Amgen´s work and that fact might be severly underestimated at this point in time.

I only glanced at Inmagene´s 007-data in AA. Looks pretty much the same as OX40 in AD: Good, but not leading, might be a drug for non-responders.

All other assets apart from 007 will not carry over. Legacy Inmagene holders will receive - you guessed it - a CVR (terms are similar to the IKNA CVR).

Reverse merger dynamics

While the stock has been trading like absolute dogs*it since the merger announcement, it should be said that it was an exceptionally bad time for biotech in general. Surprisingly, the stock just ran in-line with my favorite ShitCo-ETF BBC:

So just when the merger was approved yesterday (and an immediate liquidation was out of the picture) the stock underperformed a bit. That does not have to mean people don´t like Inmagene. We have seen a ton of tourists flocking into “busted biopharma” and they have been treated well with liquidations, buyouts or returns of capital. That is not the norm. I think it is these holders that are frustrated now.

If we look back on several reverse mergers performing strongly, almost all of them started performing well AFTER the merger was consumed. TECX, DNTH, LENZ, or QTTB are some examples - though some of these have been (partly) busted in the meantime, but that is just the nature of biotech anyway. What I am saying is: If there is strong demand for Inmagene shares, we will only know probably weeks after closing. I guess it is just an institutional thingy to wait for closing.

In the meantime, we have an awkward situation: 17 million shares are just waiting to sell - and everybody knows it. From a catalyst standpoint, Inmagene will present placebo-controlled Phase2b-data in AD in Q4 2026. Or they are aiming for that, enrolling started just recently.

Bottom line: This might be a controversial view (with zero scientific backing to put insult to injury) but just on the merger valuation, the participating investors and the CVR, I actually like IKNA and Inmagene itself down here (as long as it is cheaper than ~60% of merger valuation or 1.43$). Immunology is pretty sought after and with Nektar´s placebo response being back “in line”, trust might come back.

One more angle to think about: Historically, reverse mergers are mostly selling events, as the only cash involved is cash from the shell and valuations are made up anyway. You can see that at ALVR/KLRS, which just traded down to net cash of NewCo after closing. Importantly, there was no PIPE involved.

If we carry that logic over to Inmagene: Owners and funds are NET BUYERS in the transaction so they actually had all the incentives to reduce Inmagene´s valuation in the merger (as they are buying into that valuation). I wouldn´t be surprised at all, if the stock doubles from here until year-end or maybe after enrolling the last patient of the P2b. Until now, it has just been tossed around in a shitty market and we maybe should not read much or anything into market action at all at this point.

If you want to have a copium read for the large negative turnout against the merger: Voting against was the rational thing to do. Even if you are pro merger, IKNA would have returned 50-70% on a failed merger - and then you might have been able to invest in another way into Inmagene (maybe even cheaper). So maybe there aren´t 17 million shares waiting to be dumped after all.

Bonus fuckery

I have no idea when the ex-date for the CVR is. Merger is supposed to close “around the end of July”. Ex-date could be tomorrow, in two weeks or was yesterday. No clue.

My strategy

I already bought a small position today and will probably buy more. I hope the stock gets cheaper and there might even be an initial dump on closing (not rare in reverse merger land). No idea if Inmagene will be trading near its merger valuation at some point - but I am confident enough that it will trade materially closer to that at some point over the coming 12 months.

Disclaimer: Nothing on this blog is investing or financial advice, do your own DD. I do have a beneficial long position in IKNA as of writing.

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Quick rundown as I think this is an interesting, but not spectacular opportunity. BPMC is being bought by Sanofi for 129$ per share in Cash + a CVR that can pay up to 6$ (2+4). Tender expires in a couple of days on July 16 and yesterday important regulatory hurdles (mostly US HSR) have been cleared.

Remaining closing risk doesn´t get much more residual than this and the stock is trading “only” 30% above its pre-acquisition prices anyway, break risk not that horrible but doesn´t matter imo.

What is the CVR about?

It references solely BLU-808, a “wild-type KIT inhibitor” (great opportunity to remind everyone that I do not know what any of these words mean):

Holders will receive 2$ on Phase2b/Phase3-initiation (Not really aware what the rationale for “fifth” patient vs first is but whatever) in ANY indication. That is great in theory, but in practice, given the time constraint, this will probably have to happen in one of these two indications (from last BPMC quarterly):

If one of these returns promising results, we can expect Sanofi to take BLU-808 forward. Blueprint itself saw BLU-808 as a possible treatment option for a variety of indications, but - again - I would not really expect any other indication to be moving forward in a late stage study that quickly? Maybe if Sanofi accelerates development immediately, but we have no idea.

The second milestone of 4$ is “simply” FDA approval in any indication. If Sanofi jumps into any rare disease where accelerated approval might be an option, there could be additional indications possible, but once again I would probably ignore everything but the two ongoing programs due to time constraints. Accelerated approval is explicitly mentioned to trigger the payout as well, in case you are wondering.

What is it worth?

BPMC closed at 129.33$ yesterday. If you are ignorant about timing risk and present value, the CVR costs 33 Cents. As a europoor having to actually fund the US$ I see the CVR at implied 44 Cents when discounting the 129$ per share (assumed payment July 21 with 4.5% if you care).

Let´s walk it backwards first, what is the market implying roughly?

15% for milestone 1 (m1) and 10% for milestone 2 (m2). I´d argue that is extremely low for a product in Phase 2. That impression is amplified if you check for other drugs targeting the mechanism (ChatGPT):

Celldex´ (CLDX) Barzolvolimab is one of the most prominent KIT-drug right now and it is for sure not priced for failure.

Depending on who you ask, base rates for progressing from Phase 2 to Phase 3 are sitting around 30%:

I wouldn´t go as far as saying we have two clean 30% shots for m1 since there is probably a lot of correlation in there, but it is probably higher than 30% due to 2 shots on goal? I think you can adjust this all the way you like, but at 30% of success for m1 (ignoring that we have 2 shots on goal) the CVR is worth 46 US cents from m1 alone, completely ignoring m2.

If we move closer to base rates and allocate 20% for each indication for m1 (40% total due to assuming shared risks like safety) and assume that thereafter there is a 65% times 94% chance of approval (see above), we are looking at roughly 1.13$ per CVR:

Gameability of the CVR

The payments should amount to 130 / 260 million US$ for Sanofi (probably a touch more but doesn´t matter). In a time where 6 months earlier to market (Priority Review Voucher) trades around 150 mln US$, I´d say there is a small to medium incentive for Sanofi to slow walk development, but I think the timelines are more than sufficient - at least for the indications in advanced development. Not too worried here tbh.

Why is it cheap?

I think it is a lot of the usual when it comes to CVRs. Lots of institutions hate them but there is one additional tweak when it comes to BPMC: You need to put a ton of capital at “risk” to buy the CVR and it is simply not worth the hassle. I´ll show you why: Let´s assume you have a 1 million US$ account. You put the small amount of … everything(!) into BPMC and acquire 7.732 shares. If m1 is hit, you receive a whopping 1.55% of today´s account value in 2-3 years! Another juicy 3.09% is coming your way if m2 is hit in 6-7 years(!) - by then your account is hopefully larger anyway and the payment loses even more importance. Most professional money managers will have changed employers and will not even reap the reward.

And all that with putting your whole account (not really but it might feel that way) at risk for 10 days. Professionals won´t be able to do this, they are probably going to be capped mentally or statutory somewhere between 3 and 10% mostly, which means buying the CVR has very little value to them - if not negative, because they have to value that thing 4-12 times a year and it will distract them.

How to yolo safely

Obviously not investment advice! I have no shares as of now, but hope to gather some in the 129.2x area. The later and cheaper you buy, the better (genius me, right?). Often times stocks keep trading after the results of the tender offer. Reaching 50% acceptance is the only hurdle left (don´t see real risk here tbh) and sometimes stocks do not trade at all after the announcement, sometimes they do. No idea what´s going to happen, monitor equity corporate actions on nasdaqtrader.com for more information.

But if the stock still trades after a positive tender result, you might go ham at this point. Before that, you could buy a smaller (whatever that means for you respectively) position before. That´s what I plan to do. I just ignore the fact the the investment in the CVR itself will be small. It looks very cheap, I will buy it, no yada yadaing around, leave that to the “professionals”.

Disclaimer: Nothing on this blog is investing or financial advice, do your own DD. I do not have a beneficial long position in BPMC as of writing but plan to initiate one shortly.

What am i buying?

Sanofi is acquiring Vigil (VIGL) for 8 US$ in cash and a CVR, that will pay 2 US$ per share if VG-3927 (the asset which is at the center of this takeover) is “commercially sold” before December 31, 2035:

Let´s check out what that actually means (source for both screenshots):

The Product has to be approved in Alzheimer´s and sold in the US. That is pretty much what you would expect. I would note that the definition of just “Alzheimer´s Disease” is pretty wide and favorable for CVR holders (as opposed to “early onset Alzheimer´s” for example).

How do I value the transaction + CVR?

Look, biotech mergers are usually as simple as it gets. They close. That´s it. There are for sure edge cases but I think this is not one of them. We have a large pharma buying a non-approved, risky product in early clinical development. The mechanism of action (MoA)(“TREM2” thingy if you care) is - so far - littered with failures, for example Alector just recently and Denali/Takeda.

There is obviously a lot of interest in the MoA but nobody could make it work so far. Will Vigil work out? I have no idea. That´s where we take a look at pricing:

I allocated a 1% probability to the merger not closing, but I really see no credible way this is not closing. Regarding timing, I took the time CKPT (the latest non-tender foreign acquisition in biotech) needed to close and added 10 days.

Regarding the CVR, I allocated a whopping 2% probability of success (PoS) for each of September 2030 and 2031 to pay out for a total PoS of 4% and discounted by 10% (just my personal random hurdle rate for CVRs to account for shenanigans).

The stock closed at 7.86$ yesterday and is basically pricing only merger closing at 99% without the slightest PoS for the CVR. If my timing estimate is correct, you will earn 8.89% annualized just for the cash portion of the merger (if you blend out closing risk) - 8.21% annualized if you buy at 7.87$.

Why is it cheap?

Quite simple, Vida Ventures is blowing out. As we know, a lot of biotech funds are in distress right now and need cash to fund redemptions. They also probably don´t care if they miss out on 1.7% or 0.7% total yield AND more importantly:

As a venture capital fund (which usually have a target date to wind down) a 10-year-CVR is nothing but pain. You have to constantly value it - and it probably runs longer than the fund itself is intended to exist. All that for a low probability thingy in 4-8 years, where nobody of the current team will probably be around anyway?

We know from their 13D linked above how much they sold on June 5 and 6 and can extrapolate roughly, how much they have left to dump:

Vida stock sales from June 9 and later are my estimates. I took the percentage of volume down a bit from the days before (where we know the numbers). So they have most likely finished selling yesterday or will finish today.

Other biotech mergers are trading very tight, often even on yields below T-bills (don´t ask me why though). I think there is an opportunity for VIGL to tighten to ~7.92$-7.95$ per share in the short term if Vida is indeed the (only?) large, highly motivated seller. More upside will probably crystallize on filing for a concrete shareholder vote and of course HSR expiry, which I fully expect.

Disclaimer: Nothing on this blog is investing or financial advice, do your own DD. I do have a beneficial long position in VIGL as of writing.

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Additional thoughts

• Sanofi is not exactly known for a great M&A track-record, though I think the currently priced ~0% PoS is a touch too low :)

• Downside on a break HURTS. Size accordingly, though I´m not really worried tbh. Waiting for HSR expiry can be a valid strategy, though I would expect the majority of the opportunity to be gone by then. I would not pay serious $ for this CVR.

• I personally like the structure of the CVR. Sanofi is a decent debtor, the definition of indication is sufficiently wide and the time horizon is very large so that it is extremely unlikely that Sanofi will somehow game the CVR even though the asset is successfully developed (in Alzheimer´s).

• If you have any thoughts regarding PoS of the CVR, happy to hear them.

• As biotech and markets have run quite a bit, I think this is a prudent time to re-allocate some funds into boring stuff like this.

• The HSR for SWTX (another cross-border acquisition with an european buyer) is set to expire at midnight June 13. If the market has reservations about the view of the current administration, that could be important to watch. SWTX owns an approved product though, so even if there is a 2nd request, we will not know much about any readthrough.

• Happy hunting!

What a roller coaster. From CRL, to GSK-deal, to failing side-asset - to stopped early for efficacy. The usual madness of biotech strikes again and gives us a very interesting setup. I think Spero is a very interesting situation to monitor for the next months, as this can easily be worth half or double today´s prices and will most likely present ample opportunities to profit from.

Summary

Quick overview before we dive in for those of you with an attention span of 30 seconds (so everybody):

• We are interested in Spero solely for Tebipenem, outlicensed to GSK, which has recently successfully completed its Phase-3-study (done under a SPA with FDA) and for which substantial milestone and royalty payments will most likely be due.

• The value of solely near-term milestones amount to 2.31$ per share. Taken together with my estimate of royalties and their NPV, the stock is worth at least 2.89$ and probably 3.80 - 4.59$ . Theoretically.

• The company has not publicly disclosed what it intends to do after handing over responsibility for Tebipenem to GSK.

It´s kind of an awkward article, since my opinion changed somewhat writing it. This is why I write - now that I have finished it, I´m going to publish anway. Jump to “Putting it together” if you want to see a (quantitative) summary. I think it´s a valuable resource for a future transaction, but if you are looking for a “buy this stock now”-article, this one is not for you.

Rearview mirror

I will keep this as short as possible, I don´t care too much about the past. Spero went public in 2017, stock gyrated between 6 and 20$ until 2022. After what seemed like a successful Phase-3-study for Tebipenem (oral medication for cUTI, idea is to save a lot of costs by sending home patients early from the hospital without comprimising on efficacy), the company received a CRL and found itself cash-strapped with its back to the wall. Roughly two months later they aligned on a path forward with the FDA, which demanded another Phase-3-trial. Only 3 weeks later, GSK steps in and acquires a license to worldwide rights (except some asian countries, more on this later) for Tebipenem, providing sufficient funding for the Phase-3-study.

Spero got the study rolling and managed to bring it to its end, without diluting shareholders any more (apart from a decent amount of RSUs / options). Fast forward, end of May they announce that the trials has been stopped early for efficacy and GSK will file an NDA in H2 2025.

In these 2.5 years Spero also managed to enroll a whopping 25 patients studying SPR720 in Nontuberculous Mycobacterial Pulmonary Disease (NTM-PD). The drug was not efficacious and showed dose limiting toxicities. Company restructured, but is still “analyzing” the data.

There is a third asset (SPR206) which does not appear to be in active development, though partnered to Pfizer at one point. We ignore it.

What is Tebipenem worth to Spero?

This case has two central questions: What is Tebipenem worth - and who gets the cash? We will care about number 1 first. Let´s cover some basics:

Shares outstanding: 55.9 mln, 8.26 mln RSUs and 2.54 mln stock options, with an average strike of 10.42 though. I will blindly assume 1 mln with strike 1.5$. Leaves us with 65.66 mln shares fully diluted.

They will have an increased cost for Q2 as they are still running / winding down the study. I assume 20 million US$ of burn (as Q1), which puts the company at 15 million US$ in net cash as of end of June. From there, burn SHOULD(!) decrease substantially, but that is not too important for the moment. Let´s look at possible payments:

Sales milestones are as follows:

Milestone payments

The missing non-contingent payment, filing milestone and first sales milestones (I took a blind guess at US/EU split):

I have no clue on EU, neither GSK nor Spero mentioned anything meaningful so far so I´m using a large buffer here. FDA approval should be as close to a safe bet as possible (a Phase 3 stopped early for efficacy under SPA as a resubmission…). Discounting with 8% btw, because why not (it´s basically GSK debt + small cap add-on). I think there is not too much to argue here (maybe on the EU side), but this is basically ~88% of the current stock price (2.6 US$) right here with pretty great visibility, high probability and happening near-term.

Sales milestones and royalties

Before we look at possible sales etc., I think it is interesting to note that GSK will have spend 335 million US$ in cash on Tebipenem, without the cost of NDA filing, employees, sales preparation etc. So I don´t expect this to be a blockbuster exactly, but the value proposition is quite clear (Use IV drug and stay in hospital for several thousand US$ per night or use Tebipenem and go home) and there are 3.4 million cases of cUTI annually, where the drug could be used.

There is one downer: Spero itself owes a “low single digit” royalty and receives “low single digit to low double digit royalties” from GSK. Soooo, yeah. We have to throw some darts blindly.

Sales milestones (see screenshot above) go up to 1 billion US$ and the largest royalty tier is also above 1 billion US$ - so we can safely assume that that never happens! But they also start at 200 million US$, so I assume that this is a more than realistic target.

So, let us dive into the great art and science of “bullshit in / bullshit out”:

Really, no idea if that makes a lot of sense. Establishing a net blended royalty rate is near impossible, but I think I am on the conservative side of things here, while I am not so sure about that on the sales side. But that´s not the point - I just want to establish a reasonable range, so we will put this at a minimum NPV of 0.75$ per share and maximum of 2$ per share.

I let ChatGPT have its go and create a sensitivity analysis based on price / market penetration.

This should be a conservative assumptions. I let the AI look up solely cUTI admissions to hospitals and derive a conservative price based on the time (and thereby massive cost) saved in hospital, without being influenced by Spero´s rosy projections. This is only a fraction of what Spero views as a realistic market:

I think these are a couple of valid cornerstones and saving a bed in hospital for just a day creates very strong savings. This publication from 2018(!) puts the median cost for cUTI admission at 9.713$ with a median length of stay of 5 days → 1.940$ per day.

If you can discharge patients 1-3 days early due to Tebipenem, that obviously creates lots of value (financially + saves up capacity for other patients). A price point of 2-4k$ per course is very sensible in my eyes. Given the massive inflation since then, numbers should be meaningfully higher actually.

All in all, my assumptions for revenues and thereby royalties seem sufficiently conservative. GSK has a very strong footing in infectious diseases and investing in the field, as shown by their share of Phase-3-programs (blue colored entries):

Core unknown for Spero is, whether the royalty owed is closer to 1% or 3%.

Putting it together

To summarize, if you think my assumptions hold somewhat, the following range is a realistic range of value for Tebipenem towards Spero (but it assumes a sale event until end of Q3):

So, main caveat is obviously that I am assuming the company to be sold by end of September (assuming 10 mln$ of quarterly burn going forward - which is way too high for a shell - means losing 15 cents per share per quarter), which is maybe too aggressive.

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Opening pandoras´ box

On the other hand: With GSK taking over responsibilities for Tebipenem shortly (Spero is only responsible until Phase 3 is concluded), one abandoned asset (SPR206) and one failed asset (SPR720), there is nothing sensible(!) the company could do other than sell itself to GSK or a royalty investor (or sell just Tebipenem and liquidate or become a shell that passes through royalties - doesn´t really matter, some kind of dissolution).

Right? RIGHT??? The latest company presentation (from before the readout) mentions SPR720 two times, here:

And they give it a single slide:

Sooooo, if I am right with Tebipenem, they will sell it for somewhere between 189 and 301 million US$. Sadly, that is enough to get the idea that you would want to keep being a C-suite executive, keep golfing and watch the team incinerate the cash on an IV version of the drug. They are clearly trying to pinpoint negative developments to the “oral” part. While that does not have to necessarily mean a lot, they are clearly trying to keep that door open.

I think the market will not like it when “IV720” gets pushed forward. SPR720 took ages to enroll and it will probably easily mean 80-120 million US$ down the drain before you can draw any conclusion regarding “IV 720”. The market for NTM-PD is pretty attractive, but Spero´s track record rather poor.

As is sadly customary, my outreach to IR has been completely ignored.

Always look at the bright side…

But, so far, we have not received any really meaningful comment from Spero on the future direction of the company. With cash running out, they don´t have much options though (they might have tapped their ATM somewhat in theory, but will monetize Tebipenem surely in my opinion). Since GSK just bought out remaining Trelegy rights from Theravance, I think we can assume that GSK is at least willing to put up a bid. There is also plenty of royalty companies out there, be my guest.

Let´s look at some facts which might point in a bullish direction:

• Apart from GSK holding 16.4% (most likely?), we really have no idea who is a shareholder of Spero right now. Trading volume was massive and basically anybody can be in or out, no filings yet. The board is staggered.

• Spero already cut its workforce by 39% after SPR720 failed

• Spero does not have a CMO right now (David Hong is SVP of Clinical Development)

• CEO&CFO Esther Rajavelu has a background in finance (SMID-cap biotech research + M&A). I guess she actually knows what a NPV is, but she holds almost no common shares and maybe likes to golf?

• Former CEO and founder Ankit Mahadevia holds ~2% of shares and sits on the board. He is a former partner at Atlas and I think he knows what the right thing to do is. But as a founder he might also be very reluctant to sell and try to yolo the Tebipenem-value into “IV 720”.

• Chair Frank E. Thomas previously sold the company Orchard to Kyowa Kirin in 2024

• There is a Wells Notice out against Mahadevia and Shukla (former CEO) in connection with the IPO. Another lawsuit against the company itself is not active anymore. Maybe there is a desire to just wrap Spero up and call it a day?

Speaking of Mahadevia, who drove the stock into the ground as CEO and currently has to defend himself against a SEC-investigation. Don´t get me wrong, I will probably never accomplish what he did in terms of creating real-world outcomes. But he actually had the nerve to publish this book in September 2022, months after the CRL and the stock dropping from 19$ to below 1$ in half a year:

Dear Ankit. While September 2022 was not the time to publish this book, here and now is the time to drive an outcome that speaks for itself. Put your shareholders out of their misery!

What´s the downside?

I´d guess that between realizing value at the lower end of my assumptions, slow-walking the process, not cutting costs etc. the downside for the time being sits around 80 million US$ in market cap (trading a touch below 50% of future net cash in my lower end scenario) or 1.22$ per share.

This is biotech though, so there is always a way to make things worse: Dump shares via ATM on the market, do not sell Tebipenem rights (wait for the cash to come in with way higher cost of capital than potential buyers), maybe do a fun offering at 1.50$ per share (sprinkle some warrants on top while we´re at it) and yolo the company into “IV720” before announcing strategic alternatives in 2 years and selling for scraps.

One other recent, negative example I can think of is former Aadi - now Whitehawk - which sold its main asset and had ~5$ per share in the second of the sale. At the same time, they orchestrated a massive offering at 2.40$ (sic!) with large shareholders and bought some chinese ADCs. Instead of handing their owners 4.50 - 5$ per share in cash, they can now enjoy the stock trading at 1.68$. Thankfully there was plenty of time and opportunity to exit this horror show of governance at decent prices.

We have seen a decent amount of positive examples lately (ACHL THRD ALLK KRON and many more) though as pressure on biotech boards is rising.

My favorite way to look at this is through a scenario analysis:

I reverse engineered this to roughly land at the current stock price. If you think the probability that the company will golf the value away is larger than 45%, you should not buy the stock - and vice versa (roughly speaking).

Not counting on it, but to have mentioned it: There is an off-chance that Spero not only sells their assets at the high end of my estimates, but does something strong with the cash, in which case the stock might even trade above what they receive for Tebipenem. Crazy thoughts, I know. Not completely unheard of though.

Disclaimer: Nothing on this blog is investing or financial advice, do your own DD. I do have a beneficial long position in SPRO as of writing.

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Talking to myself: This was an interesting writeup, as I started way bullisher in my head than I ended. Unless you are very bullish Tebipenem sales or have any insight into how management thinks about the future, this looks interesting, but quite balanced to me to be honest around the 2.50$ mark.

Between dilution and some conservative adjustments, I came out a good 50-70 cents lower per share than I originally thought I would. Though revisiting cUTI hospital admissions in connection with cost per bed per day makes me think that I probably underestimate the opportunity for Tebipenem in the US.

Anyhow, I am very convinced this will be worthwile to keep an eye on, especially as a trader. I could buy the stock for ~0.95-1.20$ in size after the Phase-3-announcement, since they did not hold the stock. Let´s see if there is another slam dunk opportunity.

“Luck is, when opportunity meets preparation”

Additional thoughts

• Spero discontinued SPR206 in March 2025, Pfizer acquired ex-US rights in the past (2021) and paid 45 million US$ so far. Nothing indicates they are still developing this, but maybe there is some optionality here.

• I am surprised by the lack of ownership filings, especially with the high trading volume of several times shares outstanding

• The payments to licensor Meiji for Tebipenem have been really very low. If the royalty reflects that as well, the blended royalty rate might be higher than assumed by me

  

• Company skipped its Q1 earnings call (quite unusual for them)

• The register is as boring as it gets:

  

  Atlas was selling out over the years, Anson is involved for a long time, ADAR1 holding for a while as well. These are all small positions for these funds even after the rise in price, so not inclined to read anything into their holdings.

• Just shut it down guys. Shareholders have been left in the rain for 8 years, throw them a bone.

• Receive 0.57$ per share via Tender Offer expiring June 13

• Receive a CVR with various payouts but one of them being “at least” 0.29$ per CVR (or that´s what it looks like)

• You have 0.86$ in “hard value” via cash coming - what is that worth today and is it worth holding out for the remainder of the CVR?

• Company expects 61.432 mln CVRs will be outstanding

• Spoiler: I think the stock is worth 0.90$ to 0.95$ which means the CVR is worth 245% to 390% of what the market implies at 0.87$ per share

Identifying a valuation floor

The two payments known are roughly worth 0.851$ per share if you discount by 10%:

With the stock ending yesterday at 0.87$, you are paying just 2 cents more (or 1.22 mln US$) for the following payout possibilities (the above mentioned 0.29$ are “Additional Closing Net Cash Proceeds”):

Just glancing at this for 20 seconds, it becomes quite clear, that solely (iv) will probably cover the current cost of the CVR or at least a substantial portions via the fixed payments.

I could start flabbergasting about the various assets (do not ask me what a p300 KAT inhibitor is or what it´s worth) and their value, but I will leave it at that: Most biotech assets bring in something. I have rather little conviction in payments from (i): 2 years is an invitation to Tang to slow walk the process. (ii) is looking more promising with 6 years. We basically need almost nothing in value here to pay for the CVR (if (iv) doesn´t do the job).

So I guess we can be sure: The CVR looks pretty much like a no brainer. You pay almost nothing and have various ways to win, especially through the fixed payments from (iv). It´s simply a free call option or at least looks like it.

It is also extremely encouraging that the company resolved its lease situation by itself and did not let Kevin Tang do that. It seems trust between the parties only goes so far and that is a very good thing. We might get lucky and receive even more “Additional Closing Net Cash Proceeds”. The former CEO is a large shareholder and seems motivated to maximize his own payout. If shareholders are indeed lucky, the CVR is actually trading at a negative price right now.

The whole process of determining the “Additional Closing Net Cash Proceeds” so far is very obscure, since we have no idea what the “post closing liabilities” are (the basis for the “savings”-calculations).

Where is the risk?

Nothing is ever risk free and while that is already true in bioland, CVRs are their own wild west. I think the risk is pretty low, but it´s not zero. ChatGPT summarizing the terms regarding the “at least 0.29$-payment”:

So Concentra will have 30 days after closing to dispute the “Additional Closing Net Cash”, especially if new claims arise. Kronos is in a wind-down since November 2024, so I think the potential for negative surprises is quite low. But the main risk is sitting probably right here.

I don´t think there can be meaningful dispute with regards to yesterday´s cost savings of 0.29$ per CVR:

The parties have a “net cash schedule”. I guess Tang had 38.7 million US$ in expenses for the lease (lease payments, maintenance, heating, whatnot) in it over the years, all of that got settled for 20.5 million US$ net yesterday and here we are.

Trading the CVR

Obviously this is extremely price sensitive. If you buy the stock at 0.88$ vs 0.87$, you are not paying 1 cent / 1,1% more - you are paying ~3 cents instead of 2 cents for the CVR (if the 0.29$ savings hold) which means 50% more. Only think about what you are paying over 0.851$ as your price paid for the CVR.

Additional thoughts

• I think the CVR ist most likely worth 3-6 million US$ (or 0.048 to 0.098 per CVR) in excess of yesterdays 0.29$ per CVR but has some very decent moonshot optionality especially through (ii).

• Tang holds very little shares (~2%) himself, so he has every incentive to bullshit CVR holders.

• Bischofsberger as a large holder seems aware of this conflict and might be willing to sue (always good to have large holders in a CVR imo).

• For some older Tang CVRs I received a somewhat meaningful borrow fee over the years as some holders seem to have been short the stock. Might or might not happen again.

• Happy to hear pushback / other pitfalls in the agreement or hints for asset valuations.

• This will be the last time Tang screws me. For sure!

Disclaimer: Nothing on this blog is investing or financial advice, do your own DD. I do have a beneficial long position in KRON as of writing.

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P.S.: You should check if your tax situation allows a purchase if you choose to do so, you need to be able to effectively net the “stock loss” (you buy stock at 0.86 and sell to Tang at 0.57) against the “CVR gain” (the hopefully 0.29$).

Quick overview

Seer (Ticker: SEER) is one of those obscure names which seem to check a lot of boxes but is basically never mentioned. Let´s start with the most important bullet points before we dive in:

• Seer trades at ~50% of net cash which is melting, but not too quickly

• They generate sales of about 16-18 million US$ per year with about ~45% gross margin even on that very small scale

• Company is buying back stock

• The supervoting shares (“Class B”) of the CEO expire in December 2025 by converting into regular (“Class A”) shares

• The Board of Directors is NOT staggered

• Activist Kevin Tang is already involved

• Thermo Fisher partnered up with them to co-promote their system

Current valuation

Most important part of this stock is its valuation. With 59.43 million shares out (Class A + Class B) and 262 million US$ of net cash as of March 31 2025, we are looking at 4.42 US$ of net cash per share. Probably around ~30 cents per share are being burned each quarter, which gives us roughly 3.53$ at the end of 2025 and 2.35$ (per share) at the end of 2027, so we don´t need the stock to win right away and have plenty of time.

There is one thing this stock has, which is rare in bioland: real revenues and real gross profits. It´s not exactly Danaher, but even if you ignore almost all the cash on the balance sheet, the stock is trading at ~7X Sales 2025e. The interesting thing is, that that gives you more runway / buffer than the typical R&D-heavy biotech companies, since there is more to its value than just cash about to be burned - net cash is not a ceiling on this stock!

Valuing the operating business at 3 times sales 2025e (17.5 million US$ at midpoint) gives us 52.5 million US$ on top of the balance sheet (Olink has been acquired for more than 15X Sales). Let´s take a look at how that looks like through time:

Read: If you vale them for their net cash as of year-end 2026 and a multiple of 3 on their sales, the stock is worth 3.24$ per share.

This is obviously still a melting ice cube, but my “model” has zero growth from 2025e in it (also no dilution, rising burn etc. so lots of factors at play).

Key takeaway for me: If the company is bought, hyped or turns around the business within 18 months, they will be worth ~3-4$ per share for an upside of 50-100% - while trading below its liquidation value of ~2.35$ per share as of end of 2026.

Business model

What do they do? Again, great opportunity to remind you that I know nothing about biology, chemistry, proteomics, proteins or whatever. Seer sells hard- and software to analyze the human proteome “unbiased”, which means they are not looking to validate that something exists or is absent, but try to deliver a result as wide as possible.

That should allow researchers interesting work: Are there ways to predict that a certain person gets a certain disease (or is at a higher risk)? Do healthy people have more of A and less of B - which can help to research new medicines.

Up until now it´s obviously a niche and if you are interested in details on the business, go ham. I will not ;-) Here is their investor presentation from January 2025.

Key takeaways for me: Revenue needs to ramp up, but showing a decent gross margin at that low level of sales is very encouraging. Thermo Fisher co-marketing Seer´s products even though they bought Olink is a strong signal in my eyes as well. That agreement launched in November 2024, so it still has to play out.

Why governance aspects are key here

I think this is the most important part of the analysis and the real reason I like the stock. As with Theravance: There is plenty of cheap stuff out there right now, but we need a reliable way to be (reasonable) certain that the value of a company actually accrues to shareholders. I am copying the bullet points from above down here:

• Company is buying back stock

• The supervoting shares (“Class B”) of the CEO expire in December 2025 by converting into regular (“Class A”) shares

• The Board of Directors is NOT staggered

• Activist Kevin Tang is already involved

Share repurchase program

In May 2024 the company started a 25 million US$ buyback, which is a decent part of its market cap. I believe they are only buying below 2 US$ per share. I think this buyback is genuinely designed to maximize value per share - NOT drive up the stock price. Its effect has been very moderate - mostly due to the fact that dilution due to stock compensation offset the buyback. Still a strong signal that management likes to increase its relative ownership.

Dual share class

As I said, there are two classes of shares, which are effectively allocating a sufficient majority of voting power to the CEO. These are about to convert into regular shares:

“The Class B common stock will also automatically convert into shares of Class A common stock on December 9, 2025”

Omid Farokhzad will still be a very large shareholder after the conversion, but since the board is not staggered, investors could theoretically call for change beginning next year. To be honest I am surprised that Softbank is still involved. So far, there is not really any implication of an activist, but Kevin Tang has been involved in varying quantity (guess he is trading the ups and downs).

Nonetheless - beginning soon, shareholders could get fed up with management. The stock price performance is nothing short of horrible and even though management is at least acting reasonable (cutting costs, buying back stock, not entrenching itself), I personally think this company has a way better home in the private markets.

They company does not need access to capital and is simply bearing the unnecessary costs of being public.

How do we win though?

What is missing so far is a key way to “win”: Maybe management will take the company private again? Maybe Thermo Fisher is interested in an acquisition slightly above net cash? Maybe there is 1 or 2 holders waiting for December to go activist? If you have aMoon, Tang and potentially some other holders pressing for some sort of change / strategic alternatives, there can quickly be 20%+ of the register demanding board representation or similar things.

Another way for this to be a successful investment is - shockingly - that their product works and sells well. They are guiding for significant growth in 2025 (+24%) and if that continues into 2026, today´s valuation looks very cheap very quickly and the iceberg´s speed of melting would be reduced significantly as well.

But the simplest way to win is via “strategic alternatives”. If this happens within the next 18 months, the return on the stock is probably going to be around at least +50-100% (depending on timing / multiple / revenue).

What to do?

Seer is a stock where you have to be extremely focused on price. I am trading it on and off for over a year now. I want to be involved as the conversion of Class B shares comes closer and keep monitoring the situation (revenue, burn, changes in shareholders). At the current price of 2.14$ this is rather a “starter” for me, but I bought more way cheaper and would gladly to that again if the stock drops.

If one of the large holders want out, they could quickly push this down 20-30% which would be an excellent entry for a larger position in my opinion (I have it at 2% right now if you care, but that can change quickly with news / price).

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Disclaimer: Nothing on this blog is investing or financial advice, do your own DD. I do have a beneficial long position in SEER as of writing.

P.S. random facts

As I think this is “simply” a strong risk/reward but not a pretty much risk-free play (as Theravance was at 8.40 US$) I wanted to keep the write-up short and just introduce the stock for now. There is some stuff I did not mention but is somewhat relevant - if you are intrigued by the stock, read on.

• Bob Langer sits on the BoD.

• 18% of revenue is from academics and 12% from governments - recent NIH funding cuts are a risk here (though incorporated into guidance as management is well aware).

• Some more comments from the recent conference call, some of these surprisingly strong (yellow emphasis by me):

  

  

  I (or ChatGPT) estimates a 10.000 sample-study to translate into roughly 3-5 million US$ of revenue btw.

  

  Thermo partnership just beginning to ramp up.

  

  Stock price vs value and more cost cuts coming (just take the damn thing private).

• If you want to really dig in, you can use this Deep Research by ChatGPT as a starting point, though in my opinion it´s just a lot of words for saying “this is so cheap that the r/r is strong”.