Biovex and Oncolytics' Unrealistic Market Cap ValuPericles, I have listened to all Oncolytics’ webcasts since I have owned the stock. I do not recall Brad being asked about Biovex. I find that analysts generally do not ask a CEO to comment on a competitor since they cover the sector. The CEO has no insider information so any comment would be in the realm of speculation. I have heard other CEOs respond, “I can’t comment on that.” when asked by a reporter.
The bigger question is how relevant is the existence of Biovex to the current market cap valuation of Oncolytics of $220 million. I do not see the existence of Biovex as a justification to this unrealistic low valuation. Oncolytics’ market cap should be exceeding $500 million based on discounted expected value.
The existence of Biovex is a plus for Oncolytics and Reolysin. It demonstrates that the field is broad and can support a number of players. Oncolytics has their patents and Biovex has their set. Patents are like partnership agreements, they become necessary when there is a dispute. For the moment, the patent office has declared that the two companies are different in their pursuits. Public awareness and acceptance of this novel approach will be faster with more players promoting their successes. I wish Biovex good luck in their pursuits and hope they spare someone the loss of a loved one.
In the long term, Biovex may influence Oncolytics’ market cap valuation and stock price. Today, I find the discussion irrelevant. My estimated $1 billion smell test market cap valuation if the pivotal trial is a success does not require a significant market share. Hand2hand did the math back in his June 13th post using Brad’s assumptions to estimate $20 billion of annual revenue at a 10% share. My $5 billion estimate assumes that Reolysin has a significant impact on the marketplace. Reolysin would be the success story of success stories. It has found to be effective in the treatment of many forms of cancers, and in many combinations of chemotherapy and radiation. It is the product of choice. In this context, Biovex may be a competitor. There is room for both companies and more.
Except for bragging rights, I do not see the race to market as affecting the market cap valuation. I hope Oncolytics wins. The international Bayesian pivotal trial design puts it in the driver’s seat to win. The market cap valuation and associated stock price will reflect other variables like product effectiveness, side effects, and cost. I see many advantages in Oncolytics’ favour. Oncolytics has the patents on the use of other natural low risk viruses besides the mud puddle virus. Medhatman suggested Biovex uses modified viruses. Modifications add complications and increases cost. Biovex announced raising $70 million to conduct its pivotal trial which reflects well on Oncolytics as being a low cost producer. As a listed company, I find more information on Oncolytics than the privately held Biovex.
Time will tell how the market is shaped. It does not take a crystal ball to know that the current market cap valuation is too low at $220 million. The stock price has to move above $7 to support a $500 million market cap valuation. The question is “how soon will the market correct from the current manipulation?” Low trading volumes are causing the manipulators to loose control of the $3 trading level.