Thursday, June 4, 2009

Stock Watch: Antigenics (AGEN) Trades Shares for Debt

With shares of Antigenics (AGEN) enjoying a week-long rally, it was only a matter of time before the company announced a deal to address their debt.

That news came on Thursday after an 8k filed with the Securities and Exchange Commission revealed that, on June 3rd, Antigenics entered into a Securities Exchange Agreement with Tang Capital Partners, LP, where the company exchanged 4,028,838 shares for over twelve millions dollars of debt, including accrued and unpaid interest.

What is significant about this deal is the relatively few amount of shares offered, (4,028,838) for the amount of debt owed ($12,442,000). That equates to approximately $3.08 per share on a day that saw the stock close for under three.

It's highly unlikely that Tang Capital accepted those terms with the intention of shorting the shares because, with the positive news that has been released of late, the downside of the stock is minimal compared with the potential upside.

More likely, Tang is confident in the potential of Oncophage and Antigenics' ability to take the groundbreaking kidney cancer vaccine to market outside of Russia, where it is already approved.

Antigenics should start raking in revenue as early as the fourth quarter this year and news can come at any time regarding the progression of Oncophage's approval process or other pipeline candidates:

- talks are ongoing with regulators in Europe and the United States regarding the approval path for Oncophage.

- The company's QS-21 Stimulon adjuvant, partnered with GlaxoSmithKline (GSK), is currently being tested in the treatment of stage III melanoma patients after surgical removal of their tumor. Updates of that trial and another non small cell lung cancer trial could come this year.

- Oncophage has been granted orphan drug status for the treatment of glioma (brain cancer) by the U.S. Food and Drug Administration and EMEA.

- according to the company's most recent quarterly report, Clinical development is ongoing for an additional 14 QS-21-containing vaccines by Antigenics’ collaborative partners, including two more in Phase 3 clinical studies.

Investors are sitting on some pretty heavy gains right now, and I'm always an advocate of realizing some profits after runs like the one AGEN just had. Although I think AGEN is still a good buy while trading for around three dollars, it's also a great time to sell some of those sub-$1 shares and book a trip to Los Cabos, or another destination hotspot, and enjoy the fruits of your investing labor.

However, leave enough to be able to enjoy any future runs, because the most recent run could just be the beginning. As confidence in cancer vaccines grows, it's not out of the question to assume that AGEN could, in time, match Dendreon's (DNDN) run of earlier this year.

Eliminating twelve million dollars of debt is a significant event for Antigenics, especially under the terms with which management was able to complete the deal.

Small biotechs often get burned in stock-for debt transactions, where they often end up relinquishing shares for far less than what they are worth on the open market. This is one of those rare cases where the deal looks good for both parties- and if that's the case, then it's also good for investors.

Disclosure: VFC is long AGEN.

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1 comment:

  1. I believe a buy out is coming in the $8s soon!

    ReplyDelete

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