pyc navel gazing, page-3

Investors generally assume that the share price for any stock is the sum total of all market wisdom - on this basis Phylogica is worth a paltry $15m.

I bought shares in a junior exploration company about 12 months ago which had a significant and potentially strategic resource. When I bought the shares, the market said they were worth 43c which I believed was a significant discount. Within 6 months the market said they were only worth 22c but after pausing for breath decided that the true valuation was a share price of $1.20. The story hadn't changed but market perception of valuation gyrated.

Why didn't the PYC share price react positively to the MedImmune announcement? One reason is that momentum traders saw the price wasn't going up and disregarded the news. Another reason is that Phylogica is flying, according to Nick Woolf, below the radar at a time when investors demand a high level of proof of valuation based upon sales, multi level trade agreements and asset backing. A good story which has met potentially important milestones isn't enough.

Value investors, however, drink upstream of the herd. The Phylogica story is profoundly compelling particularly if you have the utmost confidence in management ability as they network amongst the top echelons of the Big Pharma community. Given that Paul Watt has stated in numerous presentations that the corporate objective is to achieve an exit strategy through a trade sale within 24 months, when the share price does move it could take off.

Of course there are major risks and a multitude of reasons for potential failure, however, the milestones which have been achieved provide confidence in the technology and business model. Maybe Phylogica will continue to fly under the radar until and if a second Roche deal has been signed. When it is picked up on the radar, however, we will wonder why the collective wisdom of the market was ever so uninformed.