Capital Raise Enables Investors to Be Opportunistic; Balance Sheet Shored Up
Advaxis (Nasdaq: ADXS) is an emerging biopharmaceutical company focused on developing and commercializing its proprietary immunotherapies for the treatment of cancer. Free Update Download >>
Advaxis raised $14.1M in gross proceeds, selling 4.7M shares (including overallotment) at $3.00/share. Advaxis acted with the advice of Aegis Capital Corp., to raise capital sooner rather than later given the recent downturn in biotech stock valuations, and to ensure the necessary capital to advance its business for the next several quarters. We had forecasted a capital raise later this year, but because this transaction was done at a lower valuation than we expected, hence more share dilution, our valuation range estimate for ADXS has been reduced. Importantly, the core fundamentals for ADXS remain unchanged, and a stronger balance sheet should remove any overhang of a need for more capital later this year, based on our new estimates. Investors purchasing shares directly were highly opportunistic, given the deal pricing nearly 40% below the intraday high of the day just prior to the deal’s announcement. Please See Key Disclosures and Disclaimers >>
ADXS entering Phase III, compelling platform, multiple catalysts, and discounted valuation likely to support investor interest. Lead product, ADXS-HPV moving into Phase III, a recent deal with Aratana Therapeutics (PETX) for animal health, a platform technology with the potential for multiple product opportunities, and several expected stock catalysts suggest that investors get a lot for their money, with ADXS trading at its current valuation.
Aratana deal further validates the platform, adds incremental value. Based on our forecasts, human use of the company’s immunotherapies are expected to drive most of the long-term value for ADXS. Yet, the recently announced deal with Aratana factors positively in our valuation range estimate (~$1.20 a share) and demonstrates that a major global animal health company conducted deep due diligence with favorable results, and is committing to invest in the further development and commercialization of the company’s technology for companion animal treatments. The deal resulted in $2.5M to Advaxis from Aratana ($1.5M cash, $1M equity investment at ~$4.90/share) for rights to four companion animal product candidates. While, the royalty rate range to ADXS came in below our initial estimate (adjusted in our new model), four potential products instead of our two assumed products could lead to upside. Also, if all of the milestones from this agreement are achieved, there is upside to our $10M long-term milestone forecast.
Several catalysts expected to bring visibility to ADXS shares. Advancement of the Animal Health opportunity with Aratana, a meeting with FDA on the Phase III ADXS-HPV program later this year offering potential clarity on the need for 1 or 2 pivotal trials, and a potential deal with a major pharmaceutical company combining Advaxis’ immunotherapy platform and a PD-1 inhibitor are the key potential stock catalysts this year, in our view, that could create shareholder value.
Our valuation estimates are based on assumptions that may or may not be correct. The achievement of our share price objective is subject to risks and may not be achieved. Some of these risks are outlined in the Investment Risk section of the downloadable report.