Buying and selling Properly Beneath Money, Strategic Alternate options


This might 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 firms which might be pursuing strategic alternate options like a reverse merger or liquidation.  Magenta is a medical 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 Part 1/2 trial, however shortly after, sufferers utilizing larger doses began experiencing hostile results, culminating with the loss of life of 1 trial participant and the following shutdown of the MGTA-117 medical trial.  Then yesterday afternoon, Magenta introduced they have been going to discover strategic alternate options, the press launch is somewhat imprecise 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 stability sheet is pretty easy, that they had $128.3MM in money and treasuries as of 9/30, no debt aside from subleased house in a Cambridge, MA workplace/lab advanced.

Since we’re getting near half approach by means of Q1, I annualized the Q3 burn charge for 2 quarters.  The corporate hasn’t given any preliminary indication of eliminating their workforce (as of the final 10-Ok, that they had 75 folks), however I count on that to comply with shortly, together with breaking their lease.  Cambridge is a biotech sizzling 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 web money even after spiking on the information at present.  By way of different property, Magenta does have $247.2MM in NOLs and two different early stage product candidates (one has a Part 2 trial ongoing), however as all the time, troublesome to place a price on these.

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

Disclosure: I personal shares of MGTA


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