PhaseRx Inc (NASDAQ: PZRX) Looks Too Cheap To Ignore

PhaseRx, Inc. (NASDAQ: PZRX), the pharmaceutical company, has drawn a lot of attention after the European Medicines Agency's (EMA) Committee for Orphan Medicinal Products (COMP) issued a positive opinion about the company's treatment PRX-OTC. The press release arrived after a frenetic week with plenty of action and volatility. Initially, traders pushed the share price on Monday from $1.25 to $1.91 moving 4.28 million shares, which is almost half of the total outstanding shares. Then, on Tuesday, investors made a profit and moved 2.72 million shares, consequently the share price declined to $1.53. Due to this volatile movement and the large amount of investors that traded this week, we became interested and researched the company's financial situation. Upon due diligence, we saw that the company is trading close to liquidation value. Have a look at the chart before we show you the financial figures:SourceCandidatesPhaseRx develops products for treating "inherited enzyme deficiencies in the liver using intracellular enzyme replacement therapy, or i-ERT". According to the company, the testing is expected to conclude in 2018. Additionally, the key in this company is something that we did not see highlighted in the press releases. There are no competitors in the market, thus the commercialization will be easy and profitable. Have a look at it. It was hidden in one of the documents (page 3) that we assessed:

"We are not aware of any other enzyme replacement therapies for intracellular enzyme deficiencies currently being marketed for inherited enzyme deficiencies in the liver, and believe that the commercial potential for i-ERT is completely untapped and similar to the large and growing $4 billion worldwide market for conventional enzyme replacement therapy, or ERT" Source

The company has three products under examination. One of them is close to Phase 2a/2b:SourceRecent DevelopmentsThe most important developments were; firstly, the demonstration of the preclinical proof of concept for the treatment of a second product candidate, PRX-ASL obtained in 2Q 2016, and secondly in 4Q, the test of the Hybrid mRNA Technology’s ability to deliver mRNA in a large animal tolerability study with non-human primates. These developments were totally ignored by the investors, thus the share price lost 66% of its value in 2016, going to liquidation value.The only communication that woke up investors was the one that the market received this week; that is the positive opinion from the European authorities that was mentioned in the beginning of the piece. Robert W. Overell, Ph.D., president and CEO, said the following about the news:

"This positive opinion recommending orphan drug designation for PRX-OTC in the European Union represents another important step forward towards potentially bringing this novel therapy to patients that suffer from the devastating effects of OTCD, We believe that PRX-OTC, with its first-in-class mechanism of action that can replace the missing protein in these patients, may address this significant unmet medical need." Source

In our opinion, traders reacted as it seems to be the first time that authorities mentioned that the company may be able to commercialize its products. You know how it usually works. Drugs normally are expected to be accepted in Europe, but the regulation is not very restrictive. Thus, companies try out with the FDA in America. Hence, we believe, like other professional traders, that these news are very relevant and are a key milestone in the development of the PRX-OTC.The share price is cheapThe company has a market capitalization of $17.18 million, and in the balance sheet, it has $15.48 millions in cash and $5.7 million in total debt. Making quick and simple calculations, we obtained that the book value per share is $0.8 and the cash per share is $1.32. Another pharmaceutical company could buy the company, obtain all the cash inside and get the drug candidates for a very cheap price.Funds and insidersOther professional traders also thought the same and are buying at the moment. Have a look:HolderSharesDate Reported% OutValueFMR, LLC546,362Dec 31, 20164.67%846,861Perceptive Advisors LLC200,000Dec 31, 20161.71%310,000Vanguard Group, Inc. (The)130,282Dec 31, 20161.11%201,937Regions Financial Corporation63,845Dec 31, 20160.55%98,959KCG Holdings, Inc.33,933Dec 31, 20160.29%52,596Two Sigma Securities, LLC25,708Dec 31, 20160.22%39,847UBS Group AG2,813Dec 31, 20160.02%4,360SourceFMR, Perceptive,Regions Financial and Vanguard are mutual funds. Additionally, KCG Holdings and Two Sigma Securities are quantitative hedge funds and UBS is major broker. These are the big boys.ConclusionPhaseRx has been working for a while in the development of its PRX-OTC. Investors seemed to forget the company as the share price went from trading at $6 in 2016 to $1.45. The company seemed to go straight to liquidation value. However, in 2017, the downtrend stopped and we recently saw that the traders suddenly became interested and acquired large stakes once the news turned positive. Hence, the company is close to liquidation value, which is very cheap, and it has some candidates, which may be a great catalyst in the future. Additionally, funds are aware of this situation and are buying at these levels. To sum up, do your own research as always and keep an eye on our alerts, as you could possibly benefit from timely updates. We will be updating our subscribers as soon as we know more. For the latest updates on PZRX , sign up below!Disclosure: We have no position in PZRX and have not been compensated for this article.