Bioline RX Ltd (NASDAQ:BLRX) Due For A Bounce

Bioline Rx Ltd. (NASDAQ: BLRX), a clinical stage biopharmaceutical development company working on oncology and immunology products, looks like an opportunity right now. On March 31, 2017, the company announced an underwritten public offering of its American Depositary Shares ("ADSs") that was not appreciated by the market. We witnessed the share price collapse from $1.17 to $0.89 in just a few days. We believe that the reaction of the market may have been a bit exaggerated, thus we will investigate the company a little more.

Take a look at the last movement:

Source

The company and its products

BioLineRx is a clinical stage biopharmaceutical development company, incorporated in 2003 and headquartered in Israel. Their most advanced therapeutic candidates are still in clinical development. Thus, the company has not been able to report positive net income so far. Just to give you an idea, the accumulated deficit is approximately $175.0 million.

BioLineRx has several products:

• BL-5010 (approved for marketing and sale): for the treatment of benign skin lesions.
• BL-8040 (clinical-stage therapeutic candidate): the treatment of multiple cancer and hematological indications.
• AGI-134 (therapeutic candidate): in development for solid tumors, that we expect will begin clinical stage development in the first half of 2018. Source

The announcement

The announcement of the offering was made on March 31, 2017 and the company closed it on April 5, 2017. The new ADSs were offered at a price of $0.85 and the amount of new securities issued was 33.8 million. According to its last annual report, the number of shares outstanding prior to this offering was 61,782,434.

Now, is the share price collapse justified? Well, yes and no. The fact that the company makes a capital increase makes the amount of shares outstanding increases. Thus, the value of the shares is reduced. However, from experience, we know that many investors exit the companies when the price falls dramatically like in this case and the price sometimes falls too much. We believe that we are in one of these cases.

The balance sheet and valuation

Since the company does not have revenues yet, the way we can value it is by checking the balance sheet. The most important items are as follows as of December 31, 2016:

• Cash and cash equivalents: $2.469 million
• Short-term bank deposits: $33.154 million
• Property and equipment, net: $2.605 million
• New cash from the offering (approximately): $28.75 million
• Total assets: $67.689 million (including the offering)
• Total Liabilities: $0.251 million
• Total amount of shares: 94 million

If you make some calculation, you will see that the share price is very close to the net asset value per share: approximately $0.74 (total assets-minus total liabilities divided by the total amount shares). Thus, if you are buying this company, you are mainly buying cash and a brunch of products that may be worth much more. Do you like the deal? We believe that there is an opportunity here.

On the top of it, as we commented before, the company has an accumulated deficit of $175.206 million. This amount may be very interesting for a bigger competitor such as Merck, which is always a collaborator of the company according to its website. If the company is bought out by a company that is profitable, the new business unit will use the accumulated losses of $175.206 million to pay fewer taxes. This makes BLRX a smart takeover play for a larger player like Merck.

Conclusion

We believe that market participants overreacted to the recent ADS offering and this is creating an opportunity right now. We believe BLRX is a prime bounce play for investors. To sum up, BioLineRx is a biopharmaceutical development company, trading close to its net asset value per share and with some products in the pipeline. We will be updating our subscribers as soon as we know more. For the latest updates on BLRX, sign up below!

Disclosure: We have no position in BLRX and have not been compensated for this article.