My Stock Winners

Let’s keep things real simple here…Inhibitex should have about $55 million in cash or $1.75 per share when the company reports its second quarter results next week. Based on Monday’s close of $1.20 per share the stock would need to gain 45% to reach its cash level. People need to understand that biotech and their underlying stocks are tremendous gambles because the drug approval process is slow and expensive. When things don’t turn out well, like the Veronate failure, investors run for the hills as it should. But when is a decline too much….when is pessimism overextended?

Many one hit wonder biotech companies never really make it back after their leading candidate falls off the wagon. In our experience, many of the senior management teams at these “failed” biotech companies are ill equipped to run the business when things are bleak. These people are used to success… whether it be raising money from venture capitalists…doing the IPO…or getting good clinical results. It takes a different type of person to steer a ship when things are just not going your way. We commend Inhibitex on a good job of cutting costs, protecting cash, and spending money wisely. With an annualized burn rate of $11 million, INHX has over 48 months of cash left. Maintaining the discipline to acquire FermaVir for only stock was very smart.

Post merger:

INHX will have approximately 42.5 million shares outstanding and based on yesterday’s close of $1.20 the market cap would be $51 million.
$55 million in cash
Leading drug candidate Aurexis (antibody that targets S. aureus or commonly known as staph infections), which has completed phase II clinical trials and has also been granted fast track designation by the FDA.
Potential Pharmaceutical Partner For Aurexis
Partnership with Wyeth (possibility of Phase I clinical trial)
Partnership with 3M
FermaVir’s FV-100 (which should enter Phase I trials in Q3 2007
In closing, the SmallCap MarketWatch believes that for a company worth less than nothing, shares of Inhibitex represent the best value in all of biotech