when the game changes

The CFO of Phylogica has recently underlined the importance of the next deal and what it will mean for the company. Indications are that the deal will be the biggest yet; signed with a household name in Big Pharma; one of the top 5 pharmaceutical companies in the world.

Looking through the list which appears in Phylogica's investors presentation it would appear that the deal could be furthered narrowed - given Pfizer and Roche are already partners - to three candidates.

1. Johnson & Johnson
2. GlaxoSmithKline
3. Novartis

Are they all household names? Certainly Johnson & Johnson could be considered a household name especially if you buy baby wipes, lotions or powder. Nevertheless, the name is relatively unimportant. Woolf believes that once the deal is announced it should lead to a company re-rating.

What does a re-rating signify? Is it simply a price spike on the back of a good announcement or is it a more fundamental event in the life of the company. I will hazard a guess without resorting to the dictionary. Its a game changer when the risk profile dramatically alters on the back on a key milestone or event. For a gold explorer it would be analogous to the discovery of a major deposit following years of drilling. For a biotech it might be FDA approval for a drug following a decade of research. For Phylogica it may be the deal which makes the market sit up and take notice of an outstanding business model which is delivering real outcomes on the back of outstanding science.

One outcome of a re-rating will be growing institutional interest in the stock. Still, in a way its all in front of us with no guarantees of any new deal being signed despite best endeavors. Considering, however, the other important feedback from management regarding the progress of current collaborations, its an exciting time to be on the share register.