We Got It Right On Opexa Therapeutics Inc (NASDAQ:OPXA)

Back during the middle of January, we published this piece, highlighting a potential acquisition target in small-cap biotechnology. The company in focus was Opexa Therapeutics Inc (NASDAQ:OPXA) and our reasoning was relatively simple.A couple of months prior to our highlighting it, management had released data from a phase 2 study investigating the company's lead asset in a target indication of multiple sclerosis (MS) and – as per the results – the asset in question, which is called Tcelna, didn't seem to work. The company tanked as a result, falling from around $5 a share to eventual lows in and around $0.50 a piece and sentiment was strongly negative from a forward-looking perspective.Despite this, we had something of a bullish thesis on the stock.Why? Because 2016 was a rough year for the biotech sector in terms of IPO and capital markets and, when conditions are tough, private companies will often favor a listing by acquisition (in other words, a reverse merger) as a way of gaining access to public market capital over going through the rigmarole of conducting an IPO under weak conditions. With the failure of its lead asset and the subsequent dumping of a large portion of its workforce, Opexa became what essentially amounted to a shell company with one remaining (but incredibly valuable) asset – its NASDAQ listing.Here is our conclusion from back in January:"One such alternative route is to acquire a defunct entity and basically reverse merge into its ticker. For us, this is most likely route forward for Opexa. It’s not necessarily a bad thing for shareholders. Chances are said holders will pick up a cash injection, and in all likelihood, a portion of the acquiring entity."Turns out we were spot on.On July 3, Opexa announced that it had signed a merger agreement with a private company called Acer Therapeutics, which will see the latter merge with the former for no other reason than to take over its ticker and pick up an easy NASDAQ listing. For the privilege, Acer is going to inject a little over $15 million capital into the new entity and current Acer shareholders (combined with a number of external investors that are funding the $15 million cash injection) will acquire 88.8% of the combined entity, while current Opexa shareholders will account for the remaining 11.2%.On the back of the news, Opexa has gained close to 80% and currently trades for $1.15 a piece, slightly off intraday highs (post announcement) at $1.31.So where does the company go from here? Or perhaps a better question, what do current shareholders do from here?We think there is every reason to hold onto a position right now.Acer has been developing a drug to treat a condition called Vascular Ehlers-Danlos Syndrome, which is a severe tissue disorder, and is pretty much ready to get with a New Drug Application (NDA) for the asset with the FDA.The recent financing, as reinforced by management communication on the back of the announcement, will allow the company to file for registration during the first half of 2018. This is a condition that currently has no approved treatment and, while it is a relatively rare condition (somewhere in the region of 1 in 250,000 suffer from it), there's considerable potential from a revenue perspective on a drug that hits market as both safe and effective in this indication.In other words, it's not the multiple sclerosis blockbuster that long-term Opexa holders were hoping for, but for those that held onto their exposure subsequent to the above-described collapse or, alternatively, for anyone who picked up an exposure on the back of us highlighting this one earlier this year as a potential takeover target, it's not a bad asset to pin hopes on.We will be keeping an eye on the drug's progression closely moving forward and we will take a look at the asset, and the mechanism of action that underpins it, in more detail as and when the merger closes.Catch up with our previous coverage of this one here. We will be updating our subscribers as soon as we know more. For the latest updates on OPXA, sign up below!Image courtesy of BFIShadow via FlickrDisclosure: We have no position in OPXA and have not been compensated for this article.