Tekmira Pharmaceuticals (TKMR) is a Money Vortex and The Ebola Craze, Too, Shall Pass; Price Target $10

Tekmira (TKMR) found itself rocketing again today, as the thinly traded stock pushed up as much as 14% at one point.

Leerink revealing a $25 price target and an outperform rating seemed to be the catalyst. Unfortunately for those who bought today, a price target and an outperform rating don’t do anything to change the fact that this company is burning money like nobody’s business, and is only trading at the levels it is at due to the hyped Ebola scare headlines.

In addition to this, the company has admitted they don’t even have enough of their experimental drug right now.

The report this morning first caught my eye on Benzinga:

Tekmira Pharmaceuticals (NASDAQ: TKMR) shares are trading seven percent higher Monday after Leerink revealed a $25 price target and Outperform rating.

The company has significant opportunity beyond Ebola with its RNAi product and pipeline, according to the research report. These factors make Tekmira “uniquely positioned.”

TKM-HBV, Tekmira’s hepatitis B drug has the potential to be a major growth catalyst says analyst Michael Schmidt. An investigational new drug application is expected to be filed in the second half of 2015.

Related Link: Deutsche Bank Raises Achillion Price Target 138%

Tekmira shares are up 106 percent over the past month; the company is one of few names mentioned in the recent Ebola outbreak. Shares fell 50 percent from peak to trough last week, but today’s rally is fueling a recovery.

The issue was last trading hands at $19.30, a 6.75 percent gain.

Here’s what the chart looked like at the end of trading today.

asdChart likely to experience golden cross in the next couple of trading sessions, it would appear; however, technical momentum may not carry weight on this trade as company seems to be heavily influenced strictly by headlines and how much TV/headline time it gets.

Company summary:

Tekmira calls themselves “world leaders” in RNA interference – a new type of therapy to take advantage of the body’s own natural processes to silence genes and treat human diseases.

The company has a proprietary lipid nanoparticle platform that is administered via IV and allows RNA drugs to be encapsulated in tiny particles that travel through the blood to the target issues.

The company has currently been in the news due to the recent Ebola scare – it has sent shares skyrocketing near all-time highs at around $26; the stock has since come back down under $20.

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In the pipeline, the company has 3 drugs at Phase II, 1 at Phase I, 2 in development and 3 in research.

Recent news:

August 18th – TKMR gets $25 PT and “Outperform” rating from Leerink, whose analysts are clearly scared that they, one day, might contract Ebola.

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August 8th – TKMR runs 38.1% on 25 MM shares traded after verbal confirmation from the FDA that it has modified its TKM-Ebola IND from full clinical hold to partial clinical hold. TKM-Ebola is one of three experimental treatments that have demonstrated the ability to completely protect monkeys against Ebola.

August 7th – FDA had originally issued a clinical hold letter requesting more information explaining the “mechanism of potential cytokine release and a modification to the multiple ascending dose portion of the study in order to ensure the safety of healthy volunteers.

August 4th – “The two U.S. aid workers infected with the virus were treated with an experimental drug that was rushed to Africa. One of the workers improved dramatically one hour after dosing. The problem for Tekmira bulls is that the drug was supplied by privately-held Mapp Biopharmaceuticals. Some observers believe this may lessen the FDA’s motivation to lift the clinical hold on the company’s Phase 1 healthy volunteer trial.”

CNN Link to story: http://www.cnn.com/2014/08/04/health/experimental-ebola-serum/index.html?sr=sharebar_twitter

July 10th – “Monsanto (MON) pays Tekmira Pharmaceuticals (TKMR) $1.5M for a milestone related to the research program under the Option Agreement the two companies signed in January covering Tekmira’s proprietary delivery technology and IP for use in agricultural applications. The potential value of the agreement could be as high as $86.2M if all program milestones are met.”

July 3rd – FDA first places TKM-Ebola on clinical hold.

The sad state of this company’s financials:

The financials do not, in any way, represent a company that is ready to show growth. As a matter of fact, these financials make it hard to wonder how the market can put any multiple on a stock like this – on paper, this company should be worth only the equity that it currently has on the balance sheet.

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The company has posted losses from operations for 5 out of the last 5 years; (for 4 out of the last 5 years net income). Losses from operations were $10.6 mil, $12.9 mil, and $12.1 mil in 2011, 2012, and 2013 respectively.

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The company posted a $5.9 million loss from operations for Q1 2014, compared to 2.9 million from Q1 2013. R&D costs have nearly double from Q1 2013 ($4.06 MM) to Q1 2014 ($8.2 MM). G&A costs have also more than doubled from the quarter the year prior. They tacked on warrant liability that gave them a net loss of $17.9 million for Q1 2013. Without the warrant liability, the loss for the period would have still be up from $2.5 mm to $4.3 mm.

Balance sheet:

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The company currently has $105.4 million in equity, per the last financials filed on May 14, 2014. This nearly doubled from the previous quarter as a result of cash raised from a financing in March.

The company’s cash position is up from $68 MM to $134 MM, which gives them roughly 2.5 years’ worth of operating expenses at the current burn rate.

Share structure:

Currently, there’s 22,076,852 shares outstanding with options and warrants to purchase 2.4 million additional shares.

In 2010, the company underwent a share restructuring, per the 2013 10-K, at 5:1.

The company’s share count has climbed each year – from 10.3 million in 2009 to 19.049 million in 2013, now to 22.076 MM.

The company raised $56.4 million from issuance of common shares during Q1 2014 while the price was up.

On March 26, 2014, the Company announced that it had completed an underwritten public offering of 2,125,000 common shares, at a price of $28.50 per share, representing gross proceeds of $60,562,000. The Company also granted the underwriters a 30-day option to purchase an additional 318,750 shares for an additional $9,084,000 to cover any over-allotments. The underwriters did not exercise the option. The cost of financing, including commissions and professional fees, was $4,085,000, resulting in net proceeds of $56,477,000.

Competitors:

Another reason that Tekmira may not blossom any time soon is the fact that its private competitor, ZMapp seems to be the drug that’s working thus far. It received coverage from CNN last week and Tekmira’s stock shot down, showing exactly how sensitive the buying pressure is behind this stock. 

Should news of ZMapp’s progress continue, or the Ebola scare start to fade, as will Tekmira.

(from CNN.com)

On Thursday, Dr. Kent Brantly thought he was going to die.

It was the ninth day since the American missionary worker came down sick with Ebola in Liberia.

His condition worsening by the minute, Brantly called his wife to say goodbye.

Thankfully, the call was premature.

Brantly is back on his feet — literally — after receiving a last-ditch, highly experimental drug. Another American missionary with Ebola got the same.

Brantly’s and Nancy Writebol’s conditions significantly improved after receiving the medication, sources say. Brantly was able to walk into Emory University Hospital in Atlanta after being evacuated to the United States last week, and Writebol is expected to arrive in Atlanta on Tuesday.

On July 22, Brantly woke up feeling feverish. Fearing the worst, Brantly immediately isolated himself. Writebol’ssymptoms started three days later. A rapid field blood test confirmed the infection in both of them after they had become ill with fever, vomiting and diarrhea.

It’s believed Brantly and Writebol, who worked with the aid organization Samaritan’s Purse, contracted Ebola from another health care worker at their hospital in Liberia, although the official Centers for Disease Control and Prevention case investigation has yet to be released.

The experimental drug, known as ZMapp, was developed by the biotech firm Mapp Biopharmaceutical Inc., which is based in San Diego. The patients were told that the treatment had never been tried before in a human being but had shown promise in small experiments with monkeys.

According to company documents, four monkeys infected with Ebola survived after being given the therapy within 24 hours after infection. Two of four other monkeys that started therapy within 48 hours after infection also survived. One monkey that was not treated died within five days of exposure to the virus.

Brantly and Writebol were aware of the risk of taking a new, little-understood treatment and gave informed consent, according to two sources familiar with the care of the missionary workers. In the monkeys, the experimental serum had been given within 48 hours of infection. Brantly didn’t receive it until he’d been sick for nine days.

The medicine is a three-mouse monoclonal antibody, meaning that mice were exposed to fragments of the Ebola virus and then the antibodies generated within the mice’s blood were harvested to create the medicine. It works by preventing the virus from entering and infecting new cells.

The Ebola virus causes viral hemorrhagic fever, which refers to a group of viruses that affect multiple organ systems in the body and are often accompanied by bleeding.

Early symptoms include sudden onset of fever, weakness, muscle pain, headaches and a sore throat. They later progress to vomiting, diarrhea, impaired kidney and liver function — and sometimes internal and external bleeding.

The ZMapp vials, stored at subzero temperatures, reached the hospital in Liberia where Brantly and Writebol were being treated Thursday morning. Doctors were instructed to allow the serum to thaw naturally without any additional heat. It was expected that it would be eight to 10 hours before the medicine could be given, according to a source familiar with the process.

Brantly asked that Writebol be given the first dose because he was younger and he thought he had a better chance of fighting it, and she agreed. However, as the first vial was still thawing, Brantly’s condition took a sudden turn for the worse.

Brantly began to deteriorate and developed labored breathing. He told his doctors he thought he was dying, according to a source with firsthand knowledge of the situation.

Knowing his dose was still frozen, Brantly asked if he could have Writebol’s now-thawed medication. It was brought to his room and administered through an IV. Within an hour of receiving the medication, Brantly’s condition dramatically improved. He began breathing easier; the rash over his trunk faded away. One of his doctors described the events as “miraculous.”

By the next morning, Brantly was able to take a shower on his own before getting on a specially designed Gulfstream air ambulance jet to be evacuated to the United States.

Writebol also received a vial of the medication. Her response was not as remarkable, according to sources familiar with the treatment. However, doctors on Sunday administered Writebol a second dose of the medication, which resulted in significant improvement.

She was stable enough to be evacuated back to the United States.

The process by which the medication was made available to Brantly and Writebol is highly unusual.

World Health Organization spokesman Gregory Hartl cautioned that health authorities “cannot start using untested drugs in the middle of an outbreak, for various reasons.”

Doctors Without Borders similarly weighed in on the side of caution.

“It is important to keep in mind that a large-scale provision of treatments and vaccines that are in very early stages of development has a series of scientific and ethical implications,” the organization said in a statement.

“As doctors, trying an untested drug on patients is a very difficult choice since our first priority is to do no harm, and we would not be sure that the experimental treatment would do more harm than good.”

ZMapp has not been approved for human use and has not even gone through the clinical trial process, which is standard to prove the safety and efficacy of a medication. It may have been given under the U.S. Food and Drug Administration’s “compassionate use”regulation, which allows access to investigational drugs outside clinical trials.

Getting approval for compassionate use is often long and laborious, but in the case of Brantly and Writebol, they received the medication within seven to 10 days of their exposure to the Ebola virus.

On July 30, the Defense Threat Reduction Agency, an arm of the military responsible for any chemical, biological, radiological, nuclear and high-yield explosive threats, allotted additional funding to MAPP Biopharmaceutical due to “promising results.”

Also from CNN.com:

Q: What is this drug?

A: Called ZMapp, it is a cocktail of specially engineered antibodies designed to target and inactivate the Ebola virus.

Q: What do we know about whether it works?

A: Very little. Various antibodies have been tested in small numbers of monkeys, but not people. In one study, 43 percent of treated monkeys survived when the drug was given after the animals showed symptoms.

Mapp Biopharmaceutical now is developing a combination of three antibodies that seemed most promising in those animal studies.

Q: Why isn’t ZMapp being tested more widely to find out if it works in people?

A: There’s not enough available. The antibodies are grown inside tobacco plants, and then extracted and purified, a slow process. U.S. officials have estimated that only a modest amount could be produced in two or three months, unless some way to speed production is found.

(source: http://finance.yahoo.com/news/ebola-questions-answers-unproven-drug-110425002.html)

Summary and conclusion:

This stock is fueled not by fundamentals of any sort, but by speculative buying based on the Ebola “trend” in the news.

As we all remember, there’s been no shortage of horrific diseases that have been in the headlines in recent years. SARS and bird flu, to name two, were supposed to be very real threats. Just years after these diseases hit the headlines, nobody seems to even remember them. It’s likely that the Ebola trend, as shown below by Google Trends…

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…will also eventually start to die down. Not unlike the boom in marijuana stocks, the Ebola stocks are on a momentary pop and could deflate easily, as we’ve already seen with TKMR. This name is popular now because Ebola is in the news; when that trend fades, TKMR will do the same.

Couple this with the fact that TKMR has admitted it has limited supply of its experimental Ebola drug, and that manufacturing the drug is anything but an instant process.

With an increasing number of shares, and continued losses from operations, we should be able to see a walk down of TKMR’s price as the weeks go on and the Ebola craze is put behind us. $13 and the two moving averages seem to represent the next level of support for the stock – should it move under them, we could be seeing a move back to pre-Ebola levels near $10. The stock is relatively thinly traded and news and analysis on the name could be picked up quickly due to the Ebola trend combined with the derivative nature of people wanting to profit from it (either way).

The stock closed well off its highs today after showing momentum, but QTR thinks this one is ultimately better valued around $10; where it was before the Ebola hysteria.

Best of luck to all investors.

2 thoughts on “Tekmira Pharmaceuticals (TKMR) is a Money Vortex and The Ebola Craze, Too, Shall Pass; Price Target $10

  1. TKMR is actually not a bad company, per se, it is just a biotech. Their RNA interference may actually be something worth looking at. But this stock got a way ahead of itself on the Ebola frenzy. The frenzy will calm down and just as certainly, so will TKMR stock. Pre-August hype levels sound reasonable to me. I own a few puts, and I thank you QTR for bringing it to my attention.

    Like

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