Posted by TAP Genta, Inc. (GNTA; $13.89; Cap $760m; Strong Buy) - Initiating Coverage with a Strong Buy Rating
on 1/3/2002, 9:48 am
·Hello TAP members...as some of you may remember back in Dec '99 TAP sent a stock alert out on GENE when it was trading between $9-10 stating that it was the stock to own for 2000. Gene went on to sky rocket to $75 before the tech-bubble burst and is now trading around $7. The perception for drug discovery companies such as GENE like the market itself has changed since then and the momentum has shifted to companies that will make and market their own drugs. TAP believes GNTA which some of you are already invested in will be the stock to own for 2002. GNTA was brought to TAP's attention by one of our members back in April of 2000 at which time was sent out as a stock to watch trading around 9 3/4 while GENE was soaring to new highs. On 8/22/00 GNTA was trading around 6 3/4 at which time TAP decided it was time to make it a New Pick. based on the news the company had at the time. Today TAP has decided that GNTA trading around $15 currently is definately the stock to own for 2002 in the bio-tech sector and wants to make sure all members have a chance to hop on board because according to todays Strong Buy Recommendation the train could be leaving the station very soon. Below is the coverage initiated by brokerage Thomas Weisel with a $32 price target. The key information in this report is the part about a partnership deal being close to conclusion. TAP believes that if the deal has enough 000's in it that the $32 /12 month price target could be met and exceded within 2 weeks of announcement just as GENE ran past its $65 target back in '00 when it was in its heyday. Speculation is rampant on the GNTA message boards especially after lucrative ISIP/AMGN and IMCL/BMY deals were made in '01 and the recent articles on bio-tech sector mentioning GNTA as a prime candidate to be next in line with its unequaled 4 phase 3 trials currently in progress. Also the recent addition of Dr Zenner, former CEO of Hoffmann-LaRoche to Genta's BOD has some guessing that LaRoche may be the most likely partner. Regardless who the partner may be if they lock up all phase 3 indications for Genasense the deal could be a blockbuster for GNTA. One quick note....though this brokerage isnt one of the bigger of the half dozen who have initiated coverage on GNTA, price target is the highest yet of all and the volume and price movement today is impressive. The analyst happens to have the M.D. title next to his name which makes his comment about GNTA management more credible IMO. Also there is a large short position in GNTA of almost 8 mil shares (about 28% of float) as of 12/10/01 and a short squeeze could be in the making especially should a partnership deal materialize.
We are initiating coverage of six anticancer companies that we propose are going to play a major role in the future of cancer treatment: Amgen (AMGN; Buy); Genentech (DNA; Market Perform); Idec Pharmaceuticals (IDPH; Attractive); Imclone Systems (IMCL; Market Perform); Genta, Inc. (GNTA; Strong Buy); Aphton Corporation (APHT; Buy)
Analyst: Patrick Mooney, M.D. 212.271.3761
· We are initiating research coverage of Genta, Inc. with a STRONG BUY investment rating and a 12-month price target of $32 per share. Genta is our top pick in the biotechnology cancer treatment space.
· Genasense, the companys lead anti-sense product candidate, is highly specific with limited side effects, conferring an immediate advantage over its competitors in the cancer treatment space. We believe that Genasense will be rapidly adopted as an adjuvant anticancer drug and could exceed $1 billion in worldwide sales.
· Genasense is in late-stage clinical development in four registration-directed trials. Data from all four trials should be available by mid 2Q02. We view it as likely that the compound will achieve FDA approval by 1Q03.
· Genta is close to concluding an ex-North America partnership for Genasense. We expect this deal to include substantial upfront cash and double-digit royalties. We expect this deal to conclude by 1Q02.
· Genta's management team is arguably one the best in the oncology drug development business. We have a high level of confidence in this team.
· Our valuation is based on a 12x EV/Revenue multiple of 2004 revenues, discounted back 2 years at 30%.
Estimates: FY'01 $ 0.10 m, ($0.68) ; FY02 $ 1.85m, ($0.60)
DISCLAIMER
TAP has taken a postition in GNTA common stock and is not compensated in any way by any of the companies mentioned above. Investing in any equity involves risk to capital for which TAP will not be responsible for should you decide to invest. Information above is forward looking and speculative and TAP cannot be responsible for any information contained herein although believes it to be accurate.
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