Watch and Wait

Written by GSCR Staff   
Tuesday, 26 February 2013 11:37

Anyone who follows our daily blog Market Monitor knows we highlight small health care biopharmaceutical and other related stocks regularly.  These stocks move!  Today we are going to throw a change up on Astex Pharmaceuticals, Inc. (NASDAQ – ASTX - $3.01).  Put this one on watch, but wait to pull the trigger on the buy.

The Company announced 4Q12 and annual earnings yesterday after the bell, and the news was generally positive.  First, ASTX is actually generating revenue overall, primarily from its Dacogen injection product for treatment of myelodysplastic syndromes (MDS).  This is different from most biotech companies in the small cap space, which generally are still research and development firms operating in the red.  Annual sales went from $66 million in 2011 to $83 million in 2012 with an increase in YOY 4Q revenue of 14% from 2011 to 2012 and nearly 30% from 3Q12.

So why wait to buy?

First, the technical analysis is on the bearish side.  While we do not put all our ‘stock’ in charts, they do provide a quick indication of the short term capability for the stock.  Along those lines the stock seems stuck around the $3.50 ceiling.  Second, Astex is generating a huge portion of revenue from royalty agreements as opposed to new products.  Revenue from royalties went from $60.5 million in 2011 to $71.1 in 2012.  Finally, charges related to operations are increasing.  A non-cash charge for amortization of intangibles was $8.0 million for 2012 compared with $3.2 million for 2011.

Having said all that, there are some promising projects in which Astex has in the pipeline in addition to having $10 million more in cash at the end of the year in 2012 versus 2011.  The Company has two Phase 2 trials with new products related to ovarian cancer and prostate and non-small cell lung cancer.  Another Phase 2 trial was introduced for MDS.  Finally, Astex initiated an epigenetics drug discovery collaboration with The Institute of Cancer Research and Cancer Research Technology Limited, as well as a five-year strategic drug discovery alliance with the UK's Cancer Research Technology Limited (CRT) and Newcastle University.

Let’s wait until the stock breaks through the $3.50 mark and revisit.

Have a great day!

Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours. 

Disclaimer:

This Market Monitor blog was prepared for informational purposes only. Goldman Small Cap Research, (a division of Two Triangle Consulting Group, LLC) produces research via two formats: Goldman Select Research, which typically highlights small cap companies, and Goldman Opportunity Research, which features micro cap companies in a sponsored research format. Thus, the Select product reflects the Firm’s internally generated stock ideas while the Opportunity product reflects sponsored research reports.

It is important to note that while we may track performance separately, we utilize the same coverage criteria in determining coverage of all stocks in both research formats. Please view the company’s individual disclosures for each engagement, which can be found in each company-specific report. All information contained in this blog, newsletter and in our reports were provided by the Companies or generated from our own due diligence. Our analysts are responsible only to the public, and are paid in advance to eliminate pecuniary interests, retain editorial control, and ensure independence. Analysts are compensated on a per report basis and not on the basis of his/her recommendations.

The information used and statements of fact made have been obtained from sources considered reliable but we neither guarantee nor represent the completeness or accuracy. Goldman Small Cap Research did not make an independent investigation or inquiry as to the accuracy of any information provided by the Company, or other firms. Goldman Small Cap Research relied solely upon information provided by the Company through its filings, press releases, presentations, and through its own internal due diligence for accuracy and completeness. Such information and the opinions expressed are subject to change without notice. A Goldman Small Cap Research blog, report, note, or newsletter is not intended as an offering, recommendation, or a solicitation of an offer to buy or sell the securities mentioned or discussed.

This blog does not take into account the investment objectives, financial situation, or particular needs of any particular person. This blog does not provide all information material to an investor’s decision about whether or not to make any investment. Any discussion of risks in this presentation is not a disclosure of all risks or a complete discussion of the risks mentioned. Neither Goldman Small Cap Research, nor its parent, is registered as a securities broker-dealer or an investment adviser with FINRA or with any state securities regulatory authority.

ALL INFORMATION IN THIS BLOG, REPORT OR NEWSLETTER IS PROVIDED “AS IS” WITHOUT WARRANTIES, EXPRESSED OR IMPLIED, OR REPRESENTATIONS OF ANY KIND. TO THE FULLEST EXTENT PERMISSIBLE UNDER APPLICABLE LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE FOR THE QUALITY, ACCURACY, COMPLETENESS, RELIABILITY OR TIMELINESS OF THIS   INFORMATION, OR FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES THAT MAY ARISE OUT OF THE USE OF THIS INFORMATION BY YOU OR ANYONE ELSE (INCLUDING, BUT NOT LIMITED TO, LOST PROFITS, LOSS OF OPPORTUNITIES, TRADING LOSSES, AND DAMAGES THAT MAY RESULT FROM ANY INACCURACY OR INCOMPLETENESS OF THIS INFORMATION). TO THE FULLEST EXTENT PERMITTED BY LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE TO YOU OR ANYONE ELSE UNDER ANY TORT, CONTRACT, NEGLIGENCE, STRICT LIABILITY, PRODUCTS LIABILITY, OR OTHER THEORY WITH RESPECT TO THIS PRESENTATION OF INFORMATION.

For more information, visit our Disclaimer: www.goldmanresearch.com  

Add comment
  • No comments found