Article: ONCY is a major aquistion target w/ alot of upside. ( POSTED )
Huge Upside Potential Despite Recent Rallies
By Mohsin Saeed - February 19, 2013 |
It is still too soon to say that Oncolytics has hit the jackpot, but it can be safely said that it’s an attractive acquisition target. We are already in the middle of the patent cliff with a number of big boys facing imminent crisis due to a large number of expiring patents. Pfizer is one of the most affected companies with the loss of its major drug Lipitor.
There are numerous big pharmaceuticals working on treatments for cancer that could have an interest in this company. Amgen is one of the largest bio-pharmaceutical companies in the world and has a number of oncology candidates in various stages of the clinical trials. The company has 5 oncology candidates in Phase II and 7 candidates in Phase III trials, with Vectibix in Phase II for Head & Neck Cancer and Motesanib in Phase III for first-line non-small Lung Cancer. Therefore the trial results of Oncolytics not only make it a potential threat but an attractive buyout option, especially considering the small cap of the company.
Amgen is already interested in this form of cancer treatment because it had acquired BioVex for approximately $1 billion in 2011. The company was purchased primarily for its developments in Oncolytic virus, especially encouraging results in clinical trials of OncoVEX GM-CSF. Although the company has since halted the OncoVEX H&N study, it can still be a serious contender for acquiring Oncolytics. The company's previous involvement in the purchase of BioVex will make this purchase easier in terms of synergy and valuations. Moreover, after its BioVex failure Amgen will be in the best position to judge the potential of these trial results.
. The market has responded positively to the clinical data on its two studies. The company is still testing the virus on numerous forms of cancer, and results for those trials can further push up the stock. Despite these appreciations the stock is still trading at 50% to mean a sell side target price of $8.50. I believe the price appreciation of Oncolytics is not a fluke because the drug has already successfully shown its ability to fight cancer, based on the recently released data. The company is also a major acquisition target considering the large number of organizations working towards better cancer cures. Therefore I believe that despite the recent rallies Oncolytics is still a buy for long term growth and acquisition prospects.