Benitec: A Small RNAi Stock with Big Hopes
In a previous article, we provided a list of 7 publicly traded companies involved in the RNAi Therapeutics space. With the recent IPO of Mirna Therapeutics (NASDAQ:MIRN) and the Benitec listing ADR listing (NASDAQ:BNTC), we can now rebalance our original RNAi therapeutics portfolio for a total of 9 stocks as seen below:
When creating this portfolio, we capped Alnylam (NASDAQ:ALNY) at 50% since it dwarfs all the other stocks by market cap. We also added Benitec (ASX:BLT), an Australian company that our readers were quick to point out, and which claims to have a commanding intellectual property portfolio in the RNAi space. As we can see above, the current market cap for Benitec places it at second smallest in the portfolio and about a third the size of recent RNAi IPO Mirna Therapeutics which we added as well.
Benitec hasn’t performed well having lost -53% in the last year. Here’s a look at the 5-year historical performance of Benitec shares on the ASX:
This chart doesn’t look that different from the patterns of share price movement that you often see with OTC companies. Retail investors who bought shares after the spike are underwater, and looking for some validation as the stock continues to break new lows. The strong patent portfolio that Benitec is said to have is what investors continue to point to while the share price sinks. With the share price continuing to plummet, could this Company become an attractive acquisition candidate?
When looking at the Benitec financial reports and website collateral, you can see how extensively the Company details their intellectual property (IP) portfolio. Each patent is listed along with the countries for which the patent is protected. It’s not often that a company goes out of their way to provide that many details about their IP portfolio. In addition to an in-house pipeline, they also have licensed their technology to a number of other companies as seen below:
Benitec’s in-house program is a product candidate for Hepatitis C (TT-034) which is expected to release efficacy data in Q4 2015 and complete the Phase I/IIa trial by Q2 2017.
There are many professional biotech analysts studying the RNAi space because it has the potential to create alpha. These analysts do nothing but study this technology for a living, and are far more suited to identify the companies with the most likelihood of success. The scientists who develop this technology, also communicate to the business about how they feel their IP stacks up to the competition. If at any point Benitec’s IP was perceived as being “dominant” in the RNAi space, it would be easy enough for any company to acquire them for a relative pittance based on their current market cap of $48 million.
One company providing analyst coverage of Benitec is Shaw Stockbroking which provides a nice round price target of $3.00 per share for Benitec with a current price of .49 cents. Here’s a snippet from their financial projections:
It’s not hard to imagine that a +4908% increase in revenues year-over-year would result in a +500% increase in share price, but how likely is it that these revenues will be realized? Is this a fair representation to retail investors of what potential Benitec has? It doesn’t seem that this number has any basis since the report fails to justify where this increase in revenues will come from. Benitec’s market maker, Maxim Group, also provides “analyst reports” with price targets in excess of +300% over the current price, then goes on to say:
When investing in RNAi therapeutics, you don’t have to guess which company has the dominant IP position. If you invest in a portfolio that contains all publicly traded companies in this space, you’ll have exposure to all the possible IP and most importantly you’ll be diversified. If you want to overweight Benitec (NASDAQ:BNTC), you can give it a 50% position instead of Anlylam.
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