Despite Myrexis’ Appeal As A Value Investment, There's More To Consider
Myriad Equity | Jul 17, 2012 12:32AM ET
Following the broader market deep into the red throughout late May and June of 2012, the former drug developer Myrexis (MYRX) looks capable of a temporary relief rally despite the prevalent concerns about the company’s direction, but it will be difficult. After the company switched from a drug developer to an acquisition-based firm earlier this year, it became apparent that any future value creation would have to be done through some sort of transaction rather than through clinical trials.
While the company is currently trading at a market cap well below its tangible book value, and while there has been a significant amount of insider buying in recent history, the fact remains that Myrexis has not announced any partners for its dead portfolio of drugs and continues to accumulate substantial operating losses as time goes on. Despite the stock’s current appeal as a value investment, Myrexis shareholders will grow increasingly pessimistic the longer the company takes to produce any meaningful streams of revenue.
February 15 was when Myrexis 10-Q filing, there was little detail on how the company originally intended to bring the drugs into phase II trials, which could indicate a real lack of intrinsic marketing potential for the drugs themselves. There is also the company’s anti-interferon compound MPI-0485520 which just has proof-of-concept results from to animal studies – another hard sell considering how many alternative drugs can be partnered with. Perhaps the biggest disappointment of them all was the brain cancer drug Azixa, which was suspended in 2011 after the completion of phase II trials which demonstrated that it was well-tolerated in patients.
The company is now downsizing considerably, and expects to have only 10 employees (down from 30 at the start of 2012). In addition, there should be an enormous reduction in research & development expenses that should reduce the operational burn-rate significantly, but how exactly is Myrexis creating value for the shareholders, and how will the company generate any revenue down the road? Until that question is answered, MYRX stock is only valuable for the company’s financial assets. Even these are in a state of deterioration as the company continues to operate at a loss. We’ll see if Myrexis can make an acquisition worthy of justifying its $68 million market cap in the future, but it’s going to take a miracle to turn the company around. Trade accordingly.
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