Turn Bioterror into an ATM: Vaxgen
We love the smell of panic in the morning.Last months's renewed terror alert did wonderful things for our bioterror play Vaxgen (VXGN).
Just a month ago, we pounded the table on this stock -- since then, it's up 12%.
Vaxgen's story resembles a dizzying rollercoaster ride.
Its AIDSVAX vaccine was intended to be a preventative vaccine to fight the HIV virus but failed to gain FDA approval. The stock tanked.
One day, investors woke up to a new company that had shifted its focus to developing anthrax vaccines and biologic products for the prevention/treatment of human infectious diseases.
Are you sitting down?
In its 10 year life, Vaxgen has never brought a product to market. It hasn't made a dime since 2003 -- what they made that year was chicken feed.
But, On November 4, 2004 the U.S. government forked over $877.5 million to Vaxgen so they could produce the world's first anthrax cure.
We believe Vaxgen will be taken over as soon it gets closer to bringing something to market.
M&A activity in the biotech sector is breaking out like wildfire -- with highly liquid balance sheets and anemic pipelines, Big Pharma's in an acquisitive mood.
Bottom line: our government has earmarked $6 billion dollars for biodefense and given Vaxgen -- once a division of oncology powerhouse Genentech (DNA) -- the biggest chunk of that pie.
Our expectation is that Vaxgen will one day re-list itself on the Nasdaq (it was delisted in 2004 for a delayed financial report), then get swallowed.
Who's got an appetite for Vaxgen? Our guess is Wyeth (WYE), a major global player in vaccine development.
We have a $14 price target on shares.
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