If Affymax can’t solve the problem quickly, the company’s survival is on the line. Affymax’s market capitalization fell below $90 million on Monday (which is below cash), while short interest stood at nearly 12% as of January 31, before the recall was announced. That number is quite high compared to other pharma companies like Amgen, Pfizer, and Merck, where short interest ranged from 2.5% to 0.7%.
Without being able to produce revenues, Affymax will have to rely on its cash stash in order to continue operations. The latest numbers showed total cash stood just under $100 million, but the company is bleeding dollar bills: S&P Capital IQ indicated operating cash flow was negative $27.38 million. Analyst Ed Arce of MLV & Co. estimates their cash stash is even lower, probably around $75 million; MLV has an investment banking relationship with Affymax.
The only glimmer of hope for Affymax is to find a way to re-commercialize Omontys, something Arce believes is highly unlikely. The company has very few options, as they have no compounds in their pipeline. If they can’t save Omontys, they will probably have to dramatically reduce their cost structure and reorganize the company, maybe drawing their cash pile down to $50 million, at which point they would have to either find a partner to develop some new compound, and/or assess strategic opportunities including a reverse merger. It doesn’t look good for Affymax, but there’s always hope.
Sentiment: Strong Sell