Fuzzy logic...Why is the RVX stock behaving like it is? It's a good question, Fuzzy, and I was going to take it on anyway. But, you know, you have to understand that this is just my opinion. The market on any given stock is the set of all investor opinions, including the opinions of investors who have never heard of RVX. (The process of informing investors, first about the existence and then the value of any stock, is problematic and is successful to a greater or lesser extent. Even totally uninformed investors play a role in valuation, an indirect role, not enough buyers, etc.)
When I first bought RVX, the Esperion valuation of USD 1.3 billion was a dream and I and many others didn't quite want to go there. We figured a billion dollars Canadian was appropriate and that was a number that DM quietly used in a rather benign context. In 2003 the CDN dollar was worth about 75c US so the Esperion deal was equal to about CDN 1.7 billion. So we were discounting RVX by a substantial amount. I do recall thinking that at a billion CDN that my shares might someday be worth about $40, maybe a bit more. (The real value of RVX has definitely increased since then with the new NexVas initiatives and ReVas.)
I also figured that the method of discovery used by RVX, the assaying technology, did 2 things. It produced so many therapy candidates that RVX would likely find one or more that worked and secondly, RVX probably had a lock on all the other small molecules that didn't measure up to the best but that could nevertheless compete as the statins do with each other. In other words, RVX had the worst to the best and therefore nobody could compete with RVX. That certainly indicated high potential value.
Very few investors and analysts have understood this and the company really can't talk about it. It's a forward-looking statement that has a built-in sort of guarantee so it's really a no-no for RVX. I think that may be why the assaying technology isn't detailed on the web site anymore. The result is that analysts do not discuss the method of discovery and its meaning. RVX-208 is spoken of as though it's all RVX has and that it's in early stage development and therefore highly risky. And they're right, it's risky, on some level.
What analysts and investors miss, I think, is that the very method of discovery that progressively increased the probability of medical success, at the same time and by the same action, also increased the potential value of the drugs by progressively reducing the probability of effective competition. The assaying technology was quite unique in that way.
As it turns out, a valuation with a premium over Esperion's value is a high probability. A value today of CDN $60 is about USD 1.64 billion. That same valuation of USD 1.64 billion would be worth CDN 2.2 billion or CDN $73 per share if we had the same exchange rate now as we had in 2003 when Esperion was sold. When I hear people talk about $70 to $80 I have no argument with that. The pharmas, like all US companies, have to pay the price for a declining US dollar. Then we have inflation, the increases in Intellectual Property that RVX has and the rate of failure of other heart drugs. All of these really should be factored into a final buyout price.
So, what I think we have is a misconception of risk/reward on the part of investors and analysts. If you think that the odds for success of RVX-208 (of NexVas, really) are based on the above understandings then you have no problem talking about $60 or more. Otherwise, RVX seems like a great risk at any price. My opinion is that RVX has done quite well in spite of the potential for improper risk assessment. The question then becomes at what price is the reward not worth the risk.
I always figured that before a takeout, RVX should be trading at one third to one half of the takeout price, at least until the company started to publicly discuss an offer or negotiations. So that means $20 to $30. Well, we got there, but not because people understood the risk/reward criteria. We got there because buyout rumours drove it there and it fell when those expectations were not met.
But if you believe that $60 might happen, at what point would you not buy, given what we know right now about RVX? When I first get into a thing like this I want a 5-bagger potential, at least, and I had more than that potential, I figured, when I got into this. It's pretty tough buying when you only have a double on the table, though, as we had at $30. I had so much profit that I had to take some off the table. If you fault me for that then self-preservation isn't your long suit.
But I bought most of it back at lower levels. To me, it's a definite buy at a quarter potential like right now. But you can hold only so much of any stock. Most of us are full-up so the only benefit we provide is that we won't sell. It always takes new investors who understand the deal to start some momentum buying. I don't see the company doing too much to educate new investors these days. They can't cause problems with the pharmas by promoting this too much. They took the assaying technology information off of the web site. The analysts don't get it or at least won't go out on a limb and state it. And we don't have proof that it all works. Mind you, if we had proof then there would no investment opportunity either.
So who's pushing this? Who's explaining it? Who's bringing new eyes to it? I hear DM is off somewhere doing that, in New York or somewhere. Great, maybe we'll get some new support. But I'm not holding my breath. And frankly, I don't need this to be $30 or $40. This isn't going to fall on its face. There is no imminent trial that could do that. The only real risk is that some other discovery about heart disease could be released that causes everything else to be instantly devalued. The odds of that happening are very slim.
Opinions, that's all it is, opinions born of understandings or misunderstandings. So why should mine be any better than anybody else's? Well, I trust it and so far it's been good. I trust it to be ok for the rest of the way, whenever that happens. So I wait. And it's ok.