OXIS International, Inc. (OTCMKTS:OXIS) Might Be Looking For A Buyout

OXIS International, Inc. (OTCMKTS:OXIS) is one that we have come back to on a number of occasions. The company is a biotechnology play that has had a pretty rough ride over the last 12 months, having dipped from a price of $0.32 a share back at the start of July 2016 to current prices in around $0.02 apiece. The most recent action saw Oxis take a 25% hit to its market capitalization on the announcement of an acquisition and – alongside the acquisition – the appointment of a new CEO.The implications of this acquisition, right now, remain relatively unclear. However, there is an associated takeaway that could imply some strong upside momentum for Oxis going forward and, in doing so, could offer a contrarian play against the above-mentioned early week decline in the stock.Here is what we are thinking.As per the release detailing the acquisition, Oxis will acquire Georgetown as part of a stock only deal. The latter (reportedly) has a portfolio of products that currently includes treatment for neuropathic pain, refractory epilepsies, the symptoms of myasthenia gravis, and motion sickness. This is pretty tough to verify (since there's not much information available publicly about Georgetown) so, as a starting point, we're on the lookout for any added detail ahead of the deal's closing.The company has agreed to pay 33% of its outstanding shares to Georgetown to complete the transaction, which is expected to close on or before 90 days as per the agreement.It is in this 33% share transfer that we think the recent decline is rooted. Specifically, the shares are going to have to come from somewhere and, chances are, this is going to bring about some degree of dilution (as they will probably derive from a batch of previously shelved shares).If this is the case, however, this is very much a short-term reaction and Oxis should eventually rebalance as the deal matures.Anyway, that’s not particularly important to our thesis right now.What is important is the CEO appointment. The woman taking over at Oxis is called Kathleen Clarence-Smith. She founded Georgetown and subsequently served at the helm leading into its acquisition by Oxis.Prior to this, she founded a company called Chase Pharmaceuticals Corporation in Washington D.C. A couple of years ago, Chase was acquired by Allergan plc Ordinary Shares (NYSE:AGN) for $125 million in cash and up to a further $825 million in regulatory and sales milestones.To put this another way, the new CEO of Oxis has a habit of leading companies into acquisition – first Chase Pharmaceuticals by Allergan and now, Georgetown by Oxis. We believe that her remit at Oxis could potentially be to dress the company up for acquisition by a bigger name in the healthcare space.For those not familiar with Oxis, the company has a promising oncology asset under investigation right now and is pushing to conclude a phase 2 study in said asset near term. In the healthcare space, and especially at the smaller end of the biotechnology sector, getting proof of concept from a phase II study almost always serves as a necessary step ahead of a partnership deal or acquisition by big Pharma.If we are right on this, the reasoning behind the acquisition could primarily be rooted in bolstering the company's pipeline and bringing Clarence-Smith on board ahead of a phase 2 readout (which isn't expected until early next year, but interim data should hit press relatively soon), and in turn, ahead of the company fielding offers from potential suitors.Keep in mind that this company is currently valued at a little over $2 million.For a company with a mid-stage oncology asset and now a portfolio of other candidates (once the Georgetown deal closes), this would represent an incredibly cheap acquisition, even at a considerable premium, for a mid-sized pharma.It is speculative, of course, but we have been right on this sort of thing numerous times before and we are going to keep an eye on this one for any sort of confirmation of our expectations near-term.Catch up on the whole story: check out our previous coverage here.We will be updating our subscribers as soon as we know more. For the latest updates on OXIS, sign up below!Image courtesy of Vilmos Vincze via FlickrDisclosure: We have no position in OXIS and have not been compensated for this article.