The broken biotech basket has been emptying out lately, but the latest addition is Ikena Oncology (IKNA) (~$75MM market cap), a clinical stage biotechnology targeting cancer therapies, that announced yesterday they are
shuttering development on their most advanced therapy candidate, IK-930, reducing their workforce by 53% (they previously did a 35% layoff in January) and will pursue strategic alternatives. Notably this isn't a full stop of development, Ikena does have another asset (IK-595) that dosed its first Phase 1 patient in December 2023. But Ikena does a nice job of itemizing their operating expenses in their 10-Q, making estimating future cash burn slightly easier.
Below is my quick back of envelope liquidation analysis:
The process for these situations is a well worn road at this point, others have also pointed to the new cash shell rules regarding reverse mergers going into effect July 1st could act as a catalyst; I don't think this process will take terribly long.
Some items to note here:
- OrbiMed is the largest shareholder with approximately 23% of the shares. Recent similar situations, KNTE and THRX, also featured OrbiMed near the top of shareholder registry, both produced good results with cash plus CVR buyouts.
- Bristol-Myers Squibb (BMY) previously had a collaboration agreement with Ikena for IK-175 and IK-412, they declined to go forward with development, but IKNA is looking to sell or out-license these. Probably minimal value, but could add a few cents per share in upside.
- Ikena Oncology has been quick to already sublease space and sell lab equipment, neither for significant sums, but shows some shareholder friendliness in moving quickly to a shoestring operation to preserve value.
Disclosure: I own shares of IKNA
Would you mind explaining why interest income is not taken into account on the cash held over the 2 Qs before the company winds down? Are interesting bearing accounts just not wear the cash is usually held for these companies? See that as more a margin of safety? Also, confirming IK-595 is not included in your $2.37 NAV suggesting potentially more upside?
ReplyDeleteThat's fair, probably should include interest income as well. I guess I've spent too much time living in a ZIRP world.
DeleteCorrect, doesn't include any IP value.
Good value here. I'd get interested if Orbimed released a schedule 13D stating a expression of interest for all the shares they don't already own.
ReplyDeleteGood find by a reader. IKNA initially issued the press release with the following disclosure that was later removed:
ReplyDelete"$157 million in cash and equivalents as of March 31, 2024; Projecting cash and equivalents at December 31, 2024 to range from $110 million to $120 million."
Also worth noting the CEO owns 3.5% worth $3.8m if they liquidate at $110m vs annual cash comp $550k and TC of $2.5 and 1.5m the last two years, so he stands to make far more from the liquidation and moving on to the next thing than from milking this any longer than necessary,
ReplyDeleteIsn't all his stock in the form of options with strike prices well above current price (i.e., worthless)? I could be wrong, only glanced at proxy quickly.
Deletehttps://www.bamsec.com/filing/114036124022470?cik=1835579
DeleteMark Manfredi holds 3.63% of the voting shares, certainly incentivized to strike a good deal.
0.00% of the Voting Shares.
DeleteFrom the proxy only one of his option grants have intrinsic value here with 95k shares at 1.15 strike (95,305 — 1.15 8/23/2026), a few grants have strikes in the 2 to 3 range.
Delete