Tuesday, February 23, 2010


This story begins back in the fall of 2006, when Merck paid $1.1B for Sirna Therapeutics,  a little  RNA interference technology, a/k/a  RNAi, In 2001, Merck bought another biotech, Rosetta Inpharmatics, which specializes in this "targeted" type of RNAi technology.

We've had some success in prior blogs isolating and speculating on RNAi stocks.  Let's dip our toes back in again with MRNA.  Here is my executive summary (read: quick and capsuled analysis):
(1) Both MRNA's  CEO and Chief Scientific Officer are from Sirna, so not just one guy,  but two guys, in a real sense, the two most important guys;
(2) The company is focused on Liver and Bladder cancer, two areas without much effective treatment as best I can tell, again, this bodes well for their business model; 
(3) Existing licensing agreements with Hoffman-LaRoche and Novartis; 
(4) Something happened in early 2010 causing them to bring bladder cancer to the forefront and say that an IND would be filed THIS YEAR, by the fourth quarter; 
(5) At same time, they upped forecast from one to two deals with big pharma by year end.
All of this is good, very, very, good, but so what? Lots of $100-300 million dollar market cap companies have characteristics like these, well, not lots, but some do.  Except for this fact:  MRNA current market cap is only $39M.  THIRTY-NINE MILLION!   
So my take on MRNA just going this far is that they should be valued at between 3X and 8X current market valuation.  Sirna, which arguably had less going for it in 2006 then MRNA does now, was bought out by Merck for $1.1B in cash.  What was that all about?

From the press at the time of Sirna's buy out:
"So why exactly did Merck buy Sirna? Because the biotech specializes in RNA interference technology, also known as RNAi, which could conceivably be used to control gene activity to destroy cancer cells without harming healthy cells. In 2001, Merck bought another biotech, Rosetta Inpharmatics, which specializes in this "targeted" type of RNAi technology.

"Sirna has no products on the market. The most advanced experimental product in the biotech's pipeline, a potential treatment for a type of eye disease that can cause blindness, is years away from market approval, assuming its tests are successful. But that experimental product, called Sirna-072, is not the big draw for Merck, according to Ding Ding, analyst for Maxim Group.

"I think Merck paid $1.1 billion in cash really to buy the technology platform," said Ding. "I'm not convinced that Merck is going to continue the current pipeline that Sirna has. The key pipeline that interests Merck is oncology."
Source:   http://money.cnn.com/2006/10/31/news/companies/merck/index.htm

Admittedly, things are different now then they were in October, 2006. But only in macroeconomic matters, not so different in the pharmaceutical industry and its biotechnology incubators.  Not that I think someone is going to pay $1.1B for MRNA (all though they might), but based on all of the above, the management, the platforms, the progress, the targeted diseases, I think the upper range of $100-$300M is more likely then the lower range and that the lower range is almost a lock.  That's a lot of appreciation potential a year or two ahead.

MRNA Daily Trend Model - BUY PENDING


Disclaimer:  This stock might go down instead of up, down precipitously, you can lose everything leaving the door open for Tiger Woods, looking for your wife, or worse yet....you.


MMarino said...

I don't like this companies float though.


Makes you wonder if the insiders even care about normal shareholders?

Anonymous said...

those stupid MMs, they pushed NNVC down and then brought it back up ...

Anonymous said...

float issue for me I also look the OS, at 40M, compared to NNVC which has 140.M and MRNA is much closer to having products and deals announced than NNVC. Good risk reward.