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PhaseRx Inc (NASDAQ:PZRX) Is A Prime Takeover Candidate

PhaseRx Inc (NASDAQ:PZRX) Is A Prime Takeover Candidate
Written by
Jarrod Wesson
Published on
October 17, 2017
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In our last article about PhaseRx Inc (NASDAQ:PZRX), the biopharmaceutical company, we mentioned that the company was a name to follow closely. We said that the company had received the orphan drug designation for the company’s lead candidate PRX-OTC long time ago. Thus, new data was expected. PhaseRx, Inc. is a biopharmaceutical company developing treatments for life-threatening inherited liver diseases in children. www.phaserx.comAdditionally, PZRX had lots of cash on the balance sheet as well as positive net asset per share. Furthermore, other market participants had PZRX shares, which reinforced our thesis; the company is a hidden gem, undervalued by the market.We were not wrong.On October 13, 2017, the company released new information that made the market push up the share price. From $0.88, the share price spiked up to touch the share price level of $1.37. This means that some traders were able to make 55% stock returns in only one day.On the top of it, we should highlight that more than six million shares changed hands in only one session. Thus, market interest in the stock increased as well. Have a look at it: 1 month chart for PZRXWhat happened?The company released that it will soon commence a corporate restructuring and review strategic options. We will explain in just a minute what does this mean.Let's review the company's background for those who are getting to know the company here. PZRX was founded in 2006 and is based in Seattle. It researches and develops treatments of inherited enzyme deficiencies in the liver with the help of intracellular enzyme replacement therapy, or i-ERT.Recent DevelopmentsOn September 25, 2017, we realized that things were changing inside the company. This filing was received by the market, wherein we could read that the CEO, Robert W. Overell, had been appointed Company’s principal accounting officer. The market did not react to the information, but at that time we could feel that something was about to be released.On October 13, 2017, the company noted in this press release that restructuring efforts had commenced and the company was reviewing strategic alternatives. These are the most significant words:

"Its board of directors has made a determination to conduct a restructuring of operations to reduce short-term operating costs and delay the development of its lead product candidate PRX-OTC." Source"The board of directors has also begun a review of strategic alternatives, including but not limited to a potential merger transaction." Source

What does it mean?The company is trying to preserve cash through the reduction of operating costs. We believe that this will help the Board of Directors look for a buyer, as the financial situation will be better.But, who could bid for the company?We found the following information about the company's competitors.

"Moderna LLC, Bio Blast Pharma Ltd., Alnylam Pharmaceuticals, Arcturus Therapeutics, Inc., Acuitas Therapeutics, Arbutus Biopharma Corporation, CureVac AG, Dicerna Pharmaceuticals, Inc., Horizon Pharma plc, Ocera Therapeutics, Inc., Cytonet GmbH & Co., Promethera Biosciences S.A., BioNTech AG, Synlogic, Inc. and Aeglea Biotherapeutics, Inc. " Annual Report

The company noted in its annual report that its competitors have many financial resources. Thus, one of those big competitors could buy out PZRX in order to acquire the intellectual property developed. If that happens, the shareholders may receive a significant amount of money. In most cases, the acquisition price is higher than the share price.On top of it, the company has $8 million in cash, only $5.8 million in debt, and orphan drug designations for several drug candidates. Thus, perhaps a financial sponsor could be interested in acquiring PZRX. This type of buyer would appreciate that the company has already commenced restructuring efforts.Holders and ConclusionWe appreciate that other market participants, who should have done due diligence on the stock, bought shares of this name recently. Also, please note that they have not sold shares in the last four months:HolderSharesDate Reported% OutValueVanguard Group, Inc. (The)142,182Jun 29, 20171.22%133,651Regions Financial Corporation63,845Jun 29, 20170.55%60,014Virtu KCG Holdings LLC61,326Jun 29, 20170.52%57,646SourceThe restructuring efforts and the fact that the company will look for strategic alternatives are really showing that the Board of Directors finally decided to enhance shareholder value. We celebrate the announcement like the market did. We will need to check the next announcements, as they may create new share price spikes.To sum up, this is a name to follow closely!Be sure to check out our coverage on PZRX.We will be updating our subscribers as soon as we know more. For the latest updates on PZRX, sign up below!Image courtesy of 401(K) 2012 via FlickrDisclosure: We have no position in PZRX and have not been compensated for this article.

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