ASX Shares 10 bagger

Certainly some good announcements due for MSB - Better short term but I too have most of my holding with RAC. I’m up to 70,000 shares and aim to get to around 120,000 before the end of the year.

Is a buyout the most likely scenario for RAC? I note pretty much all of the previous buyouts are USD and alternative oncology companies at the same or less stages are actually a much higher market cap. Do you have any opinion on why it’s flying under the radar and could that potentially affect buyouts? The Patents are obviously one of the biggest factors for RAC I just wonder if geography or other factors has anything to do with it

 

I think buyout is the most likely scenario. It's the more practical (faster) way to get this safe / effective drug to where it is needed (treating patients). From my research it is also the most common way for cancer treatments to be commercialised. Also recognise that once drugs are approved for a small number of pipelines they are later branched out to other indications, so 5 treatment indications might quickly become 20-50 over the course of several years. That takes a massive R&D spend and co-ordination effort to run all the Phase II and III trials for the additional indications (although some trials might be run by independent investigators). That sort of scale of R&D requires big pharma.

As an example there are now a total of 63 trials for the drug BLINCYTO ( Micromet was acquired in 2012 by AMGEN on the basis of 5 trials conducted by Micromet ). So in the 8 years since acquisition the number of trials have increased around 7-fold.

In terms of a revenue model, it can't be completely ruled out. These are some ways it could be done:

• 100% revenue to RAC - go it alone, manage the manufacturing/distribution/sales and on-going R&D (although the manufacturing would be contracted out - RAC already have a manufacturing arrangement in place)
• Licensing/partnership/royalty models - revenue is shared with a partner that takes responsibility for distribution/sales

As for flying under the Radar - a number of factors:

• People still think it is a boring old chemo drug (but recent findings show that it is actually much more than that)
• People aren't ascribing value to the historic trials and associated data and what this means for approval (they don't understand the edge that RAC have in terms of the potential pace of FDA approval and incredibly low cost of trials)
• Precise dates for the start of trials are not yet locked in yet
• The market is sceptical about the amount of cash needed for their trials (a full Phase I,2,3 set to achieve approval for one pipeline for oncology is about USD $40M, however because of RAC's history an approval trial will probably come in at $1.5M - $2M for MRD - a Phase II trial in no more than 30 patients)

A few more catalysts and awareness and investor interest will improve. I think a cross-listing on the US market will help (however I don't think they should do this too early).

I think the FDA IND (Investigational Drug Application) will be a key catalyst. This is fundamental from the perspective of achieving a green light to run a trial in the United States.

 

Latest RAC webinar video is finally up



In my view RAC has Forty Seven style potential due to similarities in pipeline.

How do you get acquired by Gilead? Forty Seven explains

RAC are in a unique position because of the historic trials. This gives RAC a fast pathway to FDA approval via a small Phase II trial in the United States ( for Leukemia ). The drug may then be used off-label for other indications such as Breast Cancer ( doctors make the decision to use the drug for their patient ).

Off-label drug use in oncology: a systematic review of literature - PubMed



This is what that could look like assuming successful trials (my analysis), noting most successful cancer biotechs move to buyout on the back of successful trials.

 

Wombat can I ask why the margin of safety? are you saying that valuation $5.08 is fair value at current pipeline, and through further execution this margin will shrink? if I'm reading it correctly.

Im also interested of timing on when they would potentially be looking for a buyout transaction, or is it that they don't go looking, they get chosen? From what I can find out the board or Dr T would actually need to approach and sit down with some pharma's for this to happen

Given a lot of the transactions referenced are in the USA and based on phase I/II trials, I do wonder how much weight the historic trials actually hold? As above you mention people may have not woken up to the relevance of Bisantrene, by people I mean retail investors, but surely company's and the top would take notice of the COH study and want to get in early.. or are they just waiting for an updated phase 2 trial on 1 of the pathway's to give some confidence

 

The ultimate product is RAC as a company. You value a house by looking at similar houses in the same street. So to value RAC you need to look at what peer companies have sold for. There's enough similarities between RAC and Forty Seven pipelines for this to be a fair comparison.

How do you get acquired by Gilead? Forty Seven explains

The margin of safety is an attempt to apply risk margin to the valuation for an investor buying RAC.

So then we need to look at the probability of a buyout transaction occurring. I am looking at it from two angles.

1. What is the probability that they will successfully achieve approval for Leukemia? Keep in mind:
   • The drug cured two french girls of Leukemia in the early 90's. They are both women now and have their own children.
   • The drug was previously approved in france
   • In multiple Phase I/II clinical trials in the 1980's and 1990's it achieved a Complete Response rate high enough to achieve approval ( average complete response is around 47% ... gliteritinib achieved FDA approval with a complete response of 21% [1] )
   • We now know from the Israel trial that Bisantrene still works ( and that was in a very, very sick patient population - too sick to be normally given chemo - these were people with just weeks to live ).
2. What is the probability that management will successfully achieve a buyout outcome? Keep in mind:
   • Clinical experience of RAC's clinical advisory board ( lead has previously taken a drug to approval ) plus well-respected key opinion leaders now on the advisory board
   • Management commercial / Pharma / Biotech experience

[1] FDA approves gilteritinib for relapsed or refractory acute myeloid leu

For clinical probability I rate 30% probability of all 3 AML trials being successful. Individually there is a higher probability of success in the Relapsed/Refactory AML since these indications were extensively trialled historically, So perhaps 80%+ for these indications given the success of the Israel trial in very, very sick and difficult to treat patients. MRD indication has lower probability as it hasn't been trialed before but success of Bisantrene as a single agent points to a strong outcome ( particularly in context of the two french girls that were cured ).

For management execution I rate a 50% probability. They seem to be a capable team, quite careful from a clinical perspective and they have deep commercial experience.

Combine the two probabilities 30% x 50% = 15%. I think that is extraordinarily low and perhaps too harsh. But the 85% margin of safety is an attempt to put a level of risk on a valuation.

My valuation against the Forty Seven transaction ultimately works out at over $30.00 per share. So RAC in theory should be more than a 30-bagger.

Similar stage Biotechs in the US are valued at over USD $1B. Look at Black Diamond Therapeutics ( current market cap USD $1.038B) . Still very early stage and does not have the historic trials pedigree of RAC.

Black Diamond Therapeutics, Inc – The Future of Precision Cancer Medicines

So why is RAC valued so low ...? Well the strategy in the last few years was wrong and new management has turned that around. They are still getting rid of the shackles of the past. People just think it is a boring chemo drug but the recent COH study point to it having Keytruda level of potential ...

Merck's quarterly Keytruda sales soar past $3B, but analysts fret over future growth

RAC's market value at the moment is purely lack of awareness of ASX retail investors. ASX investors are not very good Biotech investors. The wider market hasn't woken up to the probability of success and the potential. I think that will change as RAC progress towards IND and lock in dates for trials to start.

This is my speculation for trials timing and when readouts will occur. The light pink blocks are where I think the readouts could occur that point to trials success. It's Pathway 1 or the MRD trial that could lead to accelerated approval.



So based on this I think the potential buyout window is somewhere from Q4 of 2021.

It's the combination of AML readouts and Breast Cancer readouts that will really add value ( because of the blockbuster sales potential for treating Breast Cancer ).

I would like to see RAC listed on the NASDAQ or OTCMARKETS so that US-based investors can more easily buy the stock. In the meantime I would prefer long-term investors to soak up any lose trading stock. I don't want RAC to list overseas too soon, perhaps better just before a first trial starts or perhaps before the IND.

RAC won't need to approach potential big-Pharma buyers, I think they will come knocking ... but a bit of awareness will help. The ASH conference is a major event in Leukemia research each year and I think this will lift RAC's profile. There will be an Abstract on the Israel trial at ASH plus there is a paper due to be published soon.

62nd ASH Annual Meeting & Exposition

RAC may seek a licensing deal in asia and I think this is where the ex-J&J board member could add value. The advantage of a licensing deal is it anchors a value on Bisantrene as a treatment, that will play a part in the minds of potential big-Pharma buyers.

 

@Codie - I should add that one possible scenario is a licensing deal with an upfront payment to fund further trials and milestone payments for progress. The licensee could then down track initiate a full buyout. That type of scenario sometimes occurs.

We have this in the Annual Report just released ...

 

Gor used to trade this back in 2010-2011 when it was ekm eleckra mines circa 0.10 could of bought a few houses by now lol

 

PBH has 5 bagged now with 87% gain yesterday which was is 2.4 x purchase price.

 

10 baggers since March, April.
APT
Z1P
PBH

Potential other 10 baggers
WZR
EML

10 baggers I missed out on for property
TSLA
AAPL

Its like Pokémon - you can’t catch em all

 

TPW up 17% to-day 27% in 2 weeks, , CAT up another 25%, XRO up another 70% on purchase price, APX down 10%, RUL down 5%, KGN down 4%, APT up another 30%, 25x purchase price .

 

Anything you are looking at right now?

 

Just 7 bagged Zoom on first tranche bought in 9 months ago and bagged last tranche bought 2 weeks ago with a 47% gain so far tonight. just keeps heading up ! Largest holding too.

 

MIO has been nice, picked it up for cash in bank in covid and now getting close to 10 bag.

Next one on the agenda is IPT. Good start but easily room to 10 bag from here.

 

LayBuy listing tomorrow keep your eyes out. I’m guessing a 1 bagger on day 1 but let’s see.

 

Lots of choice for potential 10-baggers in the gold developer space. That is companies that have a resource and progressing towards and through scoping / feasibility / financing / construction.

Understand the context of long term gold bull markets though ...

 

@Fargo heckling from the sidelines again about a form of analysis you know little about.

With any form of analysis there is possibility of being right or wrong, whether it is based on a fundamental approach or single/multiple forms of technical analysis. Those who understand the EWP realise that there a risk of being wrong because, for example, the analysis requires a context to be assumed. That's why other scenarios are considered that still fit the incomplete pattern that is being analysed and of course why risk managed is used to minimise losses when they occur. I don't know of a single trader that doesn't lose money because no approach is 100% guaranteed.

 

@Fargo in the year 2050 I guess you'll be saying the same. "@Alex Straker and @kitdoctor said it's too late...." I clarified my first comments and their context. Anyway, anyone's comments would have a time limit to them. Let it go. Gotta say though, nice try and points for your persistence.

 

Can't name many 10 baggers of late.
NVX probably come closest. 29c to $2 in 3 months
There are probably 4-5 baggers at best such as KGN, TPW, SZL but I was selling stock along the way so probably more like 3-4 bagger
Many disappointed and didn't run as hard as I like from IPO like ARX or 4DX
A few private companies I've invested into like a hydrogen battery one that just struck a deal with FMG may end up being a 50-60 bagger if they pull a listing off on NASDAQ, that's probably the most interesting one, plus an online gaming company that's paying 50% dividend yields could do a 10 bagger if someone bought them out

 

i got on NVX late around .88c

Mother interesting one in that space is TLG, natural graphene as opposed to synthetic like NVX. Also a very well funded Swedish family with connections, I think it’s got a lot of legs. 60c at the moment

 

...but you've done well. Congratulations!