I have read a very good piece of analyst research from Cross Current Research LLC who are in Princeton New Jersey. They look at the undervalued nature of the prostate oncology space and compare them to leaders in HCV space.
Here are some interesting points
1. They conclude that apart from set backs in DNDN and MDVN's Alz drug failure, there is no reason why the three independent leaders in the space -DNDN, MDVN and OGXI- are undervalued. 2. They particularly note that OGXI's current enterprise value of 28 ml makes OGXI a bottom feeder 3. They go on to add the prostate cancer space is more favourable to competition than HCV because (1) the prostate oncology space is occupied by a chronic disease while HCV is curable; (2) a combination of successful drugs in prostate oncology alllows for longer survival; and, (3) the result of which is that there is an increased drug demand from the men who fortunately live longer.
At the same time, I heard the reports from the conference call in which Cormack states 427 results in bladder (Phase I) and prostate (Phase II) may be released as early as February 2012.
It seems to me that perhaps OGXI's rise in pps is not directly hitched to 011 results in Phase III.
I am refocusing on 427 phase II results in prostate for the following reasons (and in reliance on the compelling analysis mentioned above):
1. if 427 results knock the socks off expectations, this will bring attention back to the prostate cancer space. 427 is a multi indicator drug and makes OGXI more than a one drug company (unlike Cougar, MDVN and DNDN) 2. 427 is owned by OGXI, and as Cormack said, it is open to OGXI to commercialize the drug on its own or develop its own partnership arrangement. These arrangements may be accepted by the market more favourably than TEVA's deal was; 3. 011 and 427 are politically attractive. They work in combination with other drugs, are cheap and effective, and are capable of measurable success. The whole mechanism of action is directed to blocking the pathways cancer uses to grow and to knock back proteins that hinder chemo from working. Europe and the US will approve the drugs and there are no apparent commercialization problems like those encountered by DNDN. 4. if 427 knocks the socks off expectations in February in prostate, then it may trigger appreciation in the space, and this appreciation as well as 011's march to the finish line in prostate will be a very strong wind behind that accretion in pps.
In other words, OGXI may become the new driver in the space and also be the primary beneficiary of renewed investor confidence. ASCO 2012 may see OGXI return as the Cinderella of the Ball and be recognized as a potential future DNDN who can deliver on a number of commercially successful drugs worldwide.
Competition in this space is a myth, if these three companies get it together, then they will all benefit from renewed investor confidence in the prostate oncology space.
I should add that if 427 doesn't knock the socks off expectations, then the other trading theory prevails - its only 011's march to the line that will bring up the pps. In that case, OGXI will have to wait a while to see significant accretion in pps.
I am open to criticism on either theory. That's what this board is about. No comments about the Leafs though. Still embarassed its been 45 years since they last won the cup.
However, its primary endpoint is not OS or even PFS.
The primary efficacy endpoint is defined as the proportion of patients without disease progression at the 12-week evaluation after treatment with prednisone given with or without OGX-427
So unless, as you said, 427 knocks the socks off expectations by producing a progression free rate of, say, 50+%, investors (including I) would prefer not to assign too much value to 427 as it is difficult to see what a lower progression free rate of, say, 20% means when compared to abiraterone or MDV-3100. Also this trial being a pre-chemo trial, replicating the results in a P3 where the primary endpoint is OS, will be many years away.
So, I think the other trading theory will prevail.
The current valuation is ridiculous but not too unexpected. I still buy and will continue to buy for the next 18months.