x min read

Genocea Biosciences Inc (NASDAQ:GNCA) Is A Real Discount Opportunity Right Now

Genocea Biosciences Inc (NASDAQ:GNCA) Is A Real Discount Opportunity Right Now
Written by
Chris Sandburg
Published on
October 9, 2017
Copy URL
Share on LinkedIn
Share on Reddit
Share on Twitter/X
Share on Facebook
InsidrFinancial

Genocea Biosciences Inc (NASDAQ:GNCA) has been a tough stock to hold over the last month or so.The company was trading for just short of six dollars a share as recently as late September but, at the end of the month, collapsed to $1.20 before recovering slightly to current levels in and around $1.75. GNCA Daily ChartThat's a more than 70% depreciation in a matter of weeks, the size of which (in the biotechnology space) is generally reserved for binary events such as a drug failing a clinical trial or picking up a complete response letter (CRL) from the FDA.In this instance, however, we haven't seen any such binary event.The company put out some news a couple of weeks ago detailing what amounts to a reshuffle in capital expenditure focus and has sold off on this news. We think that this selloff is a dramatic overreaction to the development and that, in turn, there is an opportunity to pick up shares at a discount so long as prices remain anywhere near current levels.Here is what we are thinking.Genocea was developing a drug called GEN-003 in a target indication of genital herpes. As we reported earlier this year, the program successfully navigated mid-stage trials and the drug looked set for a relatively smooth pathway to approval in the US in its target indication.However, as per the latest news, Genocea has reported that it is putting GEN-003 on the back burner for now in favor of a focus on its oncology pipeline, which is – as things stand – preclinical.Markets have taken this as suggestive of the drug being a failed candidate; however, this is not the case. The reason that Genocea has made this move is that it cannot afford to carry out a phase 3 trial in this indication without a partner and it has failed to secure either a partner or funding from another source that would allow it to carry the drug forward.It's laid off some of its workforce, which has led to annual cost savings of $6 million and, right now, has enough cash on hand to carry through to mid next year – not an incredible runway by any stretch of the imagination but not terrible for a company at this end of the space either.The key thing to recognize here is that GEN-003 is very much still on the table, it's just about the company isn't spending any more money on it until it can find a partner. These sorts of phase 3 trials can cost hundreds of millions of dollars to conduct, especially in an indication with a population the size of that of genital herpes, underscoring the idea that this is very much a problem with capital availability and not with the efficacy of the drug under investigation.So Genocea has a phase 3-ready asset with a blockbuster earnings potential and is on the lookout for a partner that is going to help the company carry it through to FDA approval. The company also has a proprietary oncology platform called ATLAS and, for the foreseeable future, its available cash and resources will be focused on using this platform to create cancer assets – assets that should serve up some catalysts across the coming 12 months.Management outlined in its latest communication that the company intends to get an investigational new drug (IND) application with the FDA early next year and that multiple clinical trials should commence before the midpoint of 2018.To put all this in simpler terms, nothing has changed for Genocea between the start of last month and now other than the fact that the company is going to be spending $6 million less annually on its operational expenses.That, and the fact that the company is down 70%.Markets have misinterpreted the news and in this misinterpretation lies a real opportunity to pick up shares at a discount ahead of a recovery.Check out our previous coverage of this one here. We will be updating our subscribers as soon as we know more. For the latest updates on GNCA, sign up below!Image courtesy of Dan Johnson via FlickrDisclosure: We have no position in GNCA and have not been compensated for this article.

Discover Hidden Gems

Don't miss the next big opportunity. Subscribe for timely alerts on potential market movers.