Buying and selling Effectively Under Money, Strategic Alternate options

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This shall be a comparatively fast one, thanks to Writser for pointing me on this course.

Magenta Therapeutics (MGTA) (~$47MM market cap) is one other addition to my rising basket of failed biotechnology corporations which might be pursuing strategic alternate options like a reverse merger or liquidation.  Magenta is a scientific stage biotech centered on enhancing stem cell transplantation.  Their major product, MGTA-117, initially had constructive information readouts in December for his or her ongoing Section 1/2 trial, however shortly after, sufferers utilizing larger doses began experiencing adversarial results, culminating with the dying of 1 trial participant and the following shutdown of the MGTA-117 scientific trial.  Then yesterday afternoon, Magenta introduced they had been going to discover strategic alternate options, the press launch is somewhat obscure and generic.  However just like SESN and others, I anticipate Magenta first attempting to discover a buzzy reverse merger with a extra promising biotech, if that does not work, pursue a liquidation.

Magenta’s steadiness sheet is pretty easy, they’d $128.3MM in money and treasuries as of 9/30, no debt aside from subleased area in a Cambridge, MA workplace/lab advanced.

Since we’re getting near half means by Q1, I annualized the Q3 burn price for 2 quarters.  The corporate hasn’t given any preliminary indication of eliminating their workforce (as of the final 10-Ok, they’d 75 individuals), however I count on that to comply with shortly, together with breaking their lease.  Cambridge is a biotech scorching spot, Magenta or the first lessee should not have an excessive amount of bother discovering a brand new tenant.  Be happy to make your individual assumptions, however I give you MGTA buying and selling at a few 40% low cost to proforma internet money even after spiking on the information right now.  By way of different belongings, Magenta does have $247.2MM in NOLs and two different early stage product candidates (one has a Section 2 trial ongoing), however as at all times, tough to place a price on these.

The first threat right here might be the corporate deciding to double down on their two different early stage merchandise, however the low cost is huge sufficient right here to warrant an add to the basket.

Disclosure: I personal shares of MGTA

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