Wednesday, May 29, 2024
HomeValue Investing50% RIF, Trading Below Cash, Strategic Alternatives

50% RIF, Trading Below Cash, Strategic Alternatives

The broken biotech basket has been emptying out lately, but the latest addition is Ikena Oncology (IKNA) (~$75MM market cap), a clinical stage biotechnology targeting cancer therapies, that announced yesterday they are shuttering development on their most advanced therapy candidate, IK-930, reducing their workforce by 53% (they previously did a 35% layoff in January) and will pursue strategic alternatives.  Notably this isn’t a full stop of development, Ikena does have another asset (IK-595) that dosed its first Phase 1 patient in December 2023.  But Ikena does a nice job of itemizing their operating expenses in their 10-Q, making estimating future cash burn slightly easier.

Below is my quick back of envelope liquidation analysis:

The process for these situations is a well worn road at this point, others have also pointed to the new cash shell rules regarding reverse mergers going into effect July 1st could act as a catalyst; I don’t think this process will take terribly long.

Some items to note here:

  • OrbiMed is the largest shareholder with approximately 23% of the shares.  Recent similar situations, KNTE and THRX, also featured OrbiMed near the top of shareholder registry, both produced good results with cash plus CVR buyouts.
  • Bristol-Myers Squibb (BMY) previously had a collaboration agreement with Ikena for IK-175 and IK-412, they declined to go forward with development, but IKNA is looking to sell or out-license these.  Probably minimal value, but could add a few cents per share in upside.
  • Ikena Oncology has been quick to already sublease space and sell lab equipment, neither for significant sums, but shows some shareholder friendliness in moving quickly to a shoestring operation to preserve value.

Disclosure: I own shares of IKNA



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