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Transgenomic Inc (NASDAQ:TBIO) Is This Weeks Big Biotech Runner

Transgenomic Inc (NASDAQ:TBIO) Is This Weeks Big Biotech Runner
Written by
Chris Sandburg
Published on
January 13, 2017
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We're always on the lookout for biotech runners, and one that's impossible to overlook right now is Transgenomic Inc (NASDAQ:TBIO). The company gained close to 300% on Thursday, and looks set to continue its run into the end of the week. The driver? An announcement detailing an agreement that will see a Canadian entity make use of one of the company's proprietary technologies to compliment its own diagnostics platform.It's great news, and a triple digit run isn’t going to have shareholders complaining, but does the update really warrant this degree of revaluation? In short, the answer is probably yes. The entity that has agreed to use Transgenomic's technology is a big player in the North American laboratory space, and it could be a pivotal deal for the company going forward. With that said, however, there is probably also a certain degree of short squeezing coming into play. Again, not a bad thing for shareholders, but if this is the case, it does hint at a near term correction, before (and if) Transgenomic is to continue on its upside run.Here is a look at the deal that is driving the buy volume, what it means for Transgenomic, and what we expect to happen next.Transgenomic is engaged in advancing personalized medicine for the detection and treatment of cancer, and inherited diseases through its molecular technologies and clinical and research services. That's the blurb. In a less jargony interpretation, it creates technologies that allow for improved detection, diagnosis and monitoring of certain diseases, with a specific focus right now (and likely for the foreseeable future) on oncology. We have mentioned a couple of times over the past few months that blood tests are going to be the future of oncology diagnostics. A large number of companies are working on bringing this concept to reality right now, and Transgenomic is one of a few that are leading the pack.The company's flagship product is what's called the MX-ICP system, or (as it is referred to in the latest communication) the multiplexed ICE COLD-PCR.Current cancer diagnostics require tissue samples, and these can be invasive, costly, painful etc. to acquire from a patient. The gold standard in oncology diagnostics is testing and monitoring from a blood sample, but this has certain challenges associated with it. Specifically, the DNA fragments that would indicate cancer presence, or suggest cancer severity, in blood plasma, are often undetectable. With ICE COLD-PCR, Transgenomic can overcome this problem. The technology is able to separate wild type DNA from mutant DNA (it is this latter type that is related to cancer) and – and here's important part – amplify the mutant DNA to a rate of up to 500 fold. This translates directly to a 500 fold increase in sensitivity for the the DNA required to make the diagnosis for the ICE system, when compared to current standard of care DNA testing kits.In short, it can identify cancer from a blood sample where the vast majority of tests cannot.The entity that has struck a deal with Transgenomics, a company called LifeLabs, has recognized this, and has agreed to take on the technology as its mutation enrichment platform for cancer testing for the next three years minimum. LifeLabs is the largest laboratory service provider in Canada, and one of the biggest in North America. It employs over 5,000 staff and delivers over 100 million laboratory tests, supporting over 19 million patient visits annually.The exact terms of the deal are yet to be reported, so we don't know quite what impact the arrangement will have on Transgenomic's top line. With that said, however, for a company that holds a $27 million market capitalization and generates around half a million dollars in quarterly revenue (based on the last two reported quarters), it is not going to have to be too rich a deal to dramatically alter Transgenomic's fortunes over the thirty-six-month contract period.Cash is pretty weak for this one, so that is a near-term concern (reported at just $71,000 at the end of September, 2016) and debt is $7.8 million, so that builds on the concern. With that said, if the company can raise going forward without diluting its base to too high a degree, there should be plenty of growth potential on an early stage position.We will be updating our subscribers as soon as we know more. For the latest updates on TBIO, sign up below!Disclosure: We have no position in TBIO and have not been compensated for this article.

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