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Zalicus AŞ Message Board

  • stockpro18 stockpro18 Mar 23, 2011 8:17 PM Flag

    Zalicus Offers Excellent Upside

    I wrote a recent article about Zalicus (ZLCS) on October 24, stating I believe the company is considerably undervalued. I have not yet been able to speak with the CEO. Instead, this is a follow-up article based on some interesting points from a very dedicated investor along with his sources that seem viable, in my opinion.

    Zalicus could see a sizable payment soon that would generate a large move in the stock price. Sources say Zalicus is maybe looking to sell or license the following: 1) Its under-the-radar patent application for Parkinson’s disease (CRx-601); 2) its phase 2A completed Type-2 diabetes (CRx-401) drug candidate; and 3) its CRx-191/197 for topical psoriasis therapy.
    Zalicus holds a significant license to Clinicial Data Inc.’s (CLDA) ATL 313 for B-cell cancers. Sources claim Zalicus' Doctors Lee and Zimmerman have been attending major oncology conferences touting a combination treatment via its cHTS technology for multiple myeloma and gaining serious interest.
    CEO Mark Corrigan recently updated investors that its collaborator Novartis (NVS) is testing its entire oncology library through the rubric of Zalicus’s proprietary cHTS-Chalice software program. Interesting coincidence: Zalicus board member Todd Foley of MPM Capital Asset Management oversees MPM-Novartis Strategic Funds.
    Sanofi-Aventis (SNY) will hopefully in the near future release the completed 2B clinical results of Prednisporin, which is worth up to $39M in milestone payments for Zalicus, including up to 12% royalties in what may be a $1B global market in no more than a year from now. The turn-around time here is short, as the clinical study for phase 3 could be completed before year-end 2011.
    Zalicus's product candidate Synavive, having now been fine-tuned into a once/day formulation to mitigate the side-effect of headaches, not only is poised to enter phase 2B studies for rheumatoid arthritis (including osteoarthritis indications already studied), but a close study of the science reveals that the dissociative steroid concept (well protected by Zalicus’s patents) actually represents a much larger platform of additional drug candidates.
    Sources believe Zalicus, which is almost hidden inside the building of Michael Smith Laboratories on the campus of the University of British Columbia, will soon provide news from Dr. Terry Snutch and his team, who are expected to introduce to the market a second-generation pain-killing ion channel drug that in the first go-round (NMED-160) had Merck’s (MRK) $500M dollar interest. According to much deeper than usual due diligence, scientific publications and a basement full of global patents are ready to put forward at least one if not two drug candidates coming from its new and improved electrophysiological screening process.
    Chart indicators show Zalicus has started a new uptrend with very positive money flow on a six-month, bi-weekly time frame. The MACD indicator has crossed on a weekly basis for the first time in six months. Watch for a test of the 52-week high of $2.02 soon.

    My conviction is that the stock is still tremendously undervalued, considering Zalicus has zero debt and $48M cash on hand with a current marketcap of around $130M and trades at 1.7x book value. Insiders hold 35% common shares, according to CFO Justin Renz, as stated at a recent investor’s conference. I would expect new analyst coverage to start in the new year.

    I still firmly believe investors buying the stock under $2 are getting an exceptional bargain, especially considering the depth of its pipeline and its collaborative relationships with Novartis, Covidien (COV), and Sanofi-Aventi, just to name a few; it may indeed justify a 100-150% return in the near future. My 12-18 month price target for Zalicus is $4 a share, based on royalties from Exalgo, the potential market opportunity for Synavive and Prednisporin, early-stage development, and collaborative programs.

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