Tuesday, September 5, 2017

Inotek Pharmaceuticals: Selling Below NCAV, Exploring Strategic Options

Inotek (ITEK) is a rather simple and small idea that adds to my recent theme of buying up the scraps of busted biotech companies.  Inotek was focused primarily on the treatment of glaucoma, an eye disease with a high unmet need, however their only drug, Trabodenoson, failed recent trials and it appears to be the end of the road for Inotek.  They've suspended research and development, hired Perella Weinberg Partners to pursue strategic options, and now sell below net current asset value.

Their balance sheet is now mostly cash and short term investments, offset by some convertible notes:
The current market cap is around $27MM, they'll burn ~$4MM a quarter on G&A and interest costs, and NCAV is ~$57MM.  Inotek does also have $105MM in NOLs, but the company should probably just call it a day and liquidate, hopefully we know more soon, but this seems like a fairly straightforward bet.  The biggest risks are the burn rate being higher than anticipated and/or a bad reverse merger transaction happening, both are more likely than I'm probably baking into the situation.

Disclosure: I own shares of ITEK


  1. https://endpts.com/gene-therapy-startup-rocket-pharma-reverse-merges-with-troubled-inotek-after-25m-raise/

    1. Not what I was hoping for exactly. I'll hold off judgment until the proxy statement is filed, although I still won't know how to value the deal and it'll be interesting to see if shareholders approve it? Liquidation seems like the simpler path.

    2. Strange move up today, without knowing more about Rocket or how to value, I sold at $1.21, could be a mistake long term, but it's out of my buy box now.

    3. Thanks for the idea and the guidance. The IRR is pretty good on this one!