This past Thursday, Vigil Neuroscience, Inc. (VIGL) rose 18% as it announced a $40 million strategic investment from Sanofi (SNY). The stock pulled back 10% to $4.00 on Friday. This represents an outstanding buying opportunity as the $40 million investment is at the common equity equivalent of $7.44. It adds significant length to VIGL's cash runway, eliminating any dilution risk for at least the next year. At $4.00, the company is barely trading above its cash per share, representing tremendous value given Sanofi's involvement. If you like our picks you can follow this blog by clicking the follow button on the top of the left hand panel. We have 1015 followers on here as well as 120 followers on our Canadian blog. You can also follow us on Twitter @StockTradePicks which has over 5,000 followers.
From the news release:
- Sanofi to invest $40 million at an as-converted price of $7.44 per share of common stock-
- Sanofi to receive an exclusive right of first negotiation for license of Company’s small molecule TREM2 agonist program, including VG-3927, currently in phase 1 clinical studies -
- Company expects proceeds to extend cash runway into 2026 -
WATERTOWN, Mass., June 27, 2024 (GLOBE NEWSWIRE) -- Vigil Neuroscience, Inc. (Nasdaq: VIGL), a clinical-stage biotechnology company committed to harnessing the power of microglia for the treatment of neurodegenerative diseases, is pleased to announce that Sanofi (Nasdaq: SNY) has made a $40 million strategic investment in the Company at an as-converted price of $7.44 per share of common stock. Sanofi will purchase 537,634 of the Company’s Series A non-voting preferred shares, each share of which shall be convertible into ten shares of common stock. The Company will use the proceeds to fund its research and development activities.
“We are excited by this strategic investment from Sanofi, one of the world’s leading biopharmaceutical companies, for our research and development programs,” said Ivana Magovčević-Liebisch, Ph.D., J.D., President and Chief Executive Officer of Vigil. “We view Sanofi’s investment in Vigil as a validation of our promising precision medicine approach led by our two differentiated TREM2 modalities, iluzanebart and VG-3927, and Sanofi has provided valuable capital to help fund our pipeline. We look forward to the opportunity to work with Sanofi as we continue to advance our small molecule TREM2 agonist program.”
“Recent discoveries have highlighted the role of microglial signaling and neuroinflammation in neurodegenerative diseases. TREM2 is a well credentialed microglia target in this context,” said Erik Wallstroem, Sanofi's Global Head of Neurology Development. “The investment in Vigil strengthens our commitment to immunoscience and neuroimmunology.”
In connection with the equity investment, Vigil has granted Sanofi the exclusive right of first negotiation (ROFN) for an exclusive license, grant or transfer of rights to research, develop, manufacture and commercialize the Company’s small molecule TREM2 agonist program, including its clinical candidate, VG-3927. VG-3927 is currently being evaluated in a phase 1 clinical study for the potential treatment of Alzheimer’s disease.
Based on current projections, the Company expects that the proceeds from Sanofi’s investment will extend its cash runway into 2026.
This $40 million is added to the $101 million in cash and $85 million in working capital the company had as of Matrch 31, 2024. Assuming full conversion of the preferred shares into common, that leads to 43 million shares. Working capital would be $2.90 per share, meaning enterprise value is just over $1.00. Prior to this deal, working capital per share was $2.26 and the stock price was $3.78. Just accounting for the delta in the working capital thanks to the cash injection at double the equity price, the stock should have added $0.64 and be trading at over $4.40. Never mind the fact that the investment came from one of the largest pharmaceutical companies in the world in clear support of the company's pipeline.
Not only does the investment greatly improve the company's books and eliminate the need for dilution in the short run, in paves a path to where Sanofi has the right of first negotiation for a larger licensing deal that will almost certainly be greater than VIGL's market cap. Alzheimer’s drug candidates have been controversial with companies like Anavex Life Sciences Corp. (AVXL) and Cassava Sciences, Inc.(SAVA) experiencing high volatility and garnering large short interest and Biogen Inc. (BIIB) giving up on its Aduhelm program. VIGL is perfectly positioned to be the next hot Alzheimer’s stock with a high floor backed up by its strong cash position and support from Sanofi. Wedbush recently upgraded its target on VIGL to $23, and we think that is a reasonable target to have.
Disclosure: We are long VIGL
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