Tetralogic Pharmaceuticals Corp (OTCMKTS:TLOG) Is Running Up, But What's Next?

Tetralogic Pharmaceuticals Corp (OTCMKTS:TLOG) ran up from circa $0.03 a share mid week to highs just ahead of $0.15 on Thursday, closing out the session for $0.11 a share. The gains come on the back of a deal closing that – at first glance - will see the company pretty much sell itself and shut up shop. That's not an entirely correct perspective, however. There's plenty under the hood that suggests we might see this one strengthen further going forward, and that makes it an interesting one to watch as we head into the first quarter of 2017.Here's what's happened, and what we're watching going forward.So, first, a look at the deal. It first hit press back on November 2, when Tetralogic announced that it had entered into an asset purchase agreement with MEDIVIR SER'B'NPV (OTCMKTS:MVRBF). The latter is a $2.5-billion-dollar pharmaceutical company based in Sweden, which has a host of assets in its portfolio, primarily targeting infectious diseases caused by viruses.The deal involves the off-loading of what Tetralogic refers to as its SMAC mimetic program, which includes a clinical stage asset called birinapant, and a topical HDAC inhibitor, called remetinostat.It's worth noting here that this is basically the company's entire pipeline. It's certainly the entire publicized pipeline, and so if and when Tetralogic moves forward in the clinical development space, it's going to have to essentially start from scratch. Not necessarily a bad thing, but worth keeping in mind.So what's Tetralogic getting? This is where the deal gets a little more interesting. The company is getting a $12 million injection of cash, as well as milestone payments of up to $153 million based on the development and commercialization of Tetralogic’s product candidates by Medivir, which, as usual, is subject to certain conditions and limitations.Additionally, Tetralogic is set to receive earn-out payments based on annual net sales of birinapant if the asset reaches commercialization. These amount to 5% of annual net sales from $0 to $500 million; 7.5% of annual net sales from $500 million to $1 billion; and 10% of annual net sales above $1 billion.Tetralogic's entire staff has been laid off, and the company has taken on a fresh management team which, reportedly, are set to take them helm this weekend. Chances are we won't hear anything from them before the new year kick off, however.What we've got here, then, is essentially a start up biotech with little to no clinical development assets. It may have some preclinical compounds that it's kept from the public, but that's speculative at this stage. That's not all, however. There's a key difference between this company and the one we just described. This company has a solid cash balance, no debt (Medivir is assuming liabilities) and – and this is the big one – the potential for hundreds of millions of dollars cost free income if the billion-dollar Swedish biotech can carry the assets through to commercialization. In other words, it could have a solid stream of funding for the foreseeable future; funding that could be used to push a fresh compound through the early stages of development in the clinic. That's what we think the new management is here to do, and that's what we expect the company will announce at some point during the first few weeks of 2017.It's not a cut and dry situation. We're speculating that new management will take on a fresh development pipeline. However, even if it doesn’t, as a shareholder, this one's still got growth potential. If it just becomes a royalty accepting shell, it's not going to take much in the way of development to boost its value above and beyond the current market capitalization.We will be updating our subscribers as soon as we know more. For the latest updates on TLOG, sign up below!Disclosure: We have no position in TLOG and have not been compensated for this article.