Volatility remains the dominant factor across the equities market, with interest rates rising and growth stocks well underwater so far in 2022.
Ground zero for this correction is among “long duration assets”, which includes growth stocks with big hypothetical cash flows down the road but not all that much coming in the door right now. This description fits some of the most exciting names in the market. But the opportunity cost of allocating investment capital to them now, rather than to stocks with big current cash flows or bonds with rising risk-free returns, is higher every day, which drives money out of the growth space and into value and hard assets.
But that won’t always be the case. It’s important to remember that Apple and Google and Amazon were young growth stocks once.
One of the most poignant cases of this type of potential oversight is in the biotech space. Biotechs qualify as long-duration assets in many cases. And they represent some of the most beaten down names in the market right now relative to potential future returns.
With large fund managers now holding nearly 6% cash to AUM, according to Bank of America’s latest Fund Manager Survey, investors may benefit from a close look at some of the top growth opportunities in the Biotech space, including names like Adagio Therapeutics Inc. (Nasdaq:ADGI), Dynavax Technologies Corp. (Nasdaq:DVAX), Pacific Biosciences of California Inc. (Nasdaq:PACB), Cassava Sciences Inc. (Nasdaq:SAVA), Novavax Inc. (Nasdaq:NVAX), Immunogen Inc. (Nasdaq:IMGN), and BioNTech SE ADR (Nasdaq:BNTX).
However, we would also point to a lesser known name with an interesting pipeline asset that could have broad application: Oncotelic Therapeutics Inc. (OTC US:OTLC).
OTLC is a small-cap player that looks like it’s starting to really break onto the scene in both the oncology and virology markets.
The company has developed a first-in-class anti-TGF-β RNA therapeutic, OT-101, that has exhibited single agent activity in relapsed/refractory cancer patients. OT-101 also has shown activity against SARS-CoV-2 and has completed a phase 2 trial against COVID-19, with data analysis in progress. As a Covid asset, it should function agnostic of variants, which is obviously becoming an increasingly important factor.
However, as an oncology treatment, OT-101 is advancing along several paths right now. And the latest one pits it alongside KEYTRUDA, which is one of the most important cancer drugs to emerge over the past two decades.
Oncotelic Therapeutics Inc. (OTC US:OTLC) most recently announced the formation of a Joint Venture with Dragon Overseas Capital Limited. Dragon Overseas is a company affiliated with Golden Mountain Partners, LLC.
“I am excited to announce that, together with our partner Dragon Overseas, we have formed a JV for the discovery, development and commercialization of TGF-β therapeutics against all pharmaceutical indications,” said Dr. Vuong Trieu, CEO and Chairman of Oncotelic. “This JV unburdens the Company of the high cost of drug development, which the JV will be responsible for, while the Company will participate in its upside through appreciation in the value of its shares in the JV.”
According to details released about the deal, Oncotelic will receive up to $50 million on sale of the RPD voucher following marketing approval of OT-101 for DIPG, Dragon Overseas has agreed to invest cash and other assets with a value of approximately $27.6 million for 55% ownership of the JV, and Oncotelic has Licensed OT-101 to the JV for a 45% ownership in the JV.
In addition, the Joint Venture will be headquartered in Hong Kong with an initial focus on the further development and commercialization of OT-101, including for DIPG as well as pancreatic cancers and glioblastoma.
But the deal is actually even broader. In a follow-up letter, Trieu noted that it would pursue “the discovery, development and commercialization TGF-β therapeutics against all pharmaceutical indications.”
One should also note that this deal stands to put a promising pipeline asset on much firmer financial ground:
“This transaction allows us to unburden the Company of the high cost of drug development, which the JV will be responsible for, while the Company will participate in its upside through appreciation in the value of its shares in the JV and up to $50MM on the sale of the RPD voucher following marketing approval of OT-101 for DIPG. Dragon Overseas has agreed to invest cash and other assets with a value of approximately $27.6MM for 55% ownership of the JV; and Oncotelic has granted the License to the JV for 45% ownership in the JV.”
Oncotelic Therapeutics Inc. (OTC US:OTLC) shares have been outperforming the broad market of late, rising about 140% in the past 8 months on rising dollar-based volume measures. The stock is now trading above upward sloped major moving averages.
