Here's why I think Endocyte is a buy: 1. Numerous potential catalysts 2. Sound scientific basis 3. Great financial position 4. Other possibilities
1. Catalysts a. Milestone payments from Merck for new trials. I think Merck will be aggressive in initiating new phase I clinical trials for the folate receptor ++ cancers. Although I don't know the structure of these payments, the latest 8-k from Endocyte states that we'll know more in the "full text of the Agreement, which the Company intends to file as an exhibit to future periodic reports filed with the Securities and Exchange Commission." http://www.sec.gov/Archives/edgar/data/1235007/000129993312000903/htm_44779.htm Their next regularly scheduled 10Q could be out in the middle of May. I think new indications could be a catalyst, as well as clarity on the milestones.
d. Who predicted the Merck deal? And yet it was a catalyst... And yet it was a catalyst... Perhaps some deals regarding EC0225, EC17, arthritis or inflammation research, or EC20 licensing?
2. Scientifically sound a. Phase II Lung cancer data presented last week http://investor.endocyte.com/events.cfm (ELCC 2012)showed overall survival increased to 47 weeks for EC145 FR++ patients compared to a 23 week historical baseline!
b. The platinum resistant ovarian cancer data http://investor.endocyte.com/events.cfm (Company presentation page 19-20) showed a hazard ratio of 0.495 (<1 is good) after accounting for proportional hazards. The stock tanked in December 2011 because initial analysis showed a hazard ratio of 1.42, or that the drug was more hazardous. But the updated hazard ratio corrects for the fact that the EC145 FR++ patients might have started off in worse shape or gotten less post trial treatment. So overall survival is favored after adjusting for these variations. The trial didn't have enough statistics to conclusively prove the effect on overall survival one way or the other. But the adjusted data IS FAVORABLE to survival, and it certainly doesn't mean the trial failed, like the market seems to believe given the Dec 2011 reaction.
3. Good financials a. Although Endocyte is paying for a majority of the phase III PROCEED ovarian cancer trial, ~50million?, Merck is paying for the rest of the EC145 trials. That means lung cancer, breast cancer, colon cancer, phase 1, phase 2, phase 3, etc. etc. etc. The 120 million cash + 880 million milestones doesn't include the cost of the research! It's not a billion dollar deal, but a billion dollar deal plus Merck picks up the tab!
b. Cash is now around 220 million or so, given a market cap of 257 million, the company is in a very strong financial position, capable of conducting research for many years.
4. Other possibilities? a. Short interest rose to 1.78 million on April 13th, the day before the Merck deal was announced. That's up from 1.44 million two weeks earlier, and 760 thousand before the December misperception of ovarian cancer trial results. http://www.nasdaq.com/symbol/ecyt/short-interest I don't mean to cloud the facts with speculation, but thought i'd throw that out there as an aside.