Part of the investment thesis covered in our Harris & Harris Report, January 10 (NASDAQ: TINY – $5.44) was that we would see Harris & Harris (“H&H”) increase the volume of shorter-duration, high-return deals to produce incremental returns and lower operating costs.
The recent announcement of a $2 million investment in publicly-traded Champions Oncology, Inc., formerly known as Champions Biotechnology, Inc (“Champions”) (PINK: CSBR) is another data point indicating that the management team is executing on this front. This isn’t a trade, so the big jump in CSBR shares is beside the point. Oncology (along with biochemistry) is a major new frontier in the commercialization of science. It is perhaps too soon to know how well the Champions Biotechnology solution will go, but surely, if it is highly effective, the value of the company will grow far beyond the current $35m market value and H&H will enjoy attractive returns. As with all investments of this ilk, it’s highly risky and could go to zero. H&H has a stake, but it’s diversified among dozens of other investments across multiple spaces. And they have done the due diligence for us: unless you know more than most about oncology, it’s hard to own shares of Champions Biotechnology as an individual holding.
H&H’s $2 million investment was part of a private placement of 12.5 million shares, priced at $0.75 per share, resulting in a $9.4 million raise for Champions. The investor group consisted of several institutional investors, including Battery Venture Group, Harris & Harris Group, Inc., and Perceptive Advisors, LLC. Champions’ Chief Executive Officer, Joel Ackerman, and President, Ronnie Morris, also participated in the financing. The stock closed up over yesterday by 24% to $1.18 following the announcement of the completion of the private placement.
H&H’s investment in Champions comes less than a month after H&H portfolio group company BioVex was acquired by drug giant Amgen for up to $1 billion. It highlights H&H’s investment process – namely, venture capital investments in nanotechnology that include private and publicly-traded companies that have exceptional growth potential.
Champions is the brainchild of Dr. David Sidransky, a world-renowned oncologist at Johns Hopkins University in Baltimore, Maryland. The company has developed an innovative platform, called Tumorgrafts™, that assists researchers and physicians in matching oncology drugs to patients. Champions’ Tumorgrafts™ process involves the implantation of human tumors into immune-deficient mice, followed by propagation of the resulting engraftments, or tumorgrafts, in a manner that preserves the biological characteristics or heterogeneity of the original human tumor. The technology platform enables Champions to build a proprietary tumor tissue library and create robust, predictive oncology models for testing. As such, it is a novel approach to personalizing cancer healthcare.
Champions’ technology is of growing interest to pharmaceutical companies and physicians who seek to better determine the efficacy of cancer drugs in clinical trials. The company generated over $7 million in revenue and $1.5 million of operating cash flow in the past 12 months. There is no debt on the balance sheet. We haven’t delved into Champions’ business model to determine its intrinsic value, so it is difficult to say at this point what the potential upside is in the investment. That said, we see a great deal of opportunity in the future for innovative oncology technology platforms such as Champions’ Tumorgrafts™.
In summary, we view H&H’s investment in Champions as another positive catalyst for TINY. We expect to see a pick-up in investment activity at H&H in the months ahead, as the company seeks to add liquidity to its investment portfolio while building out its premier nanotechnology venture capital franchise during a time of increased commercialization of nanotechnology. We will be publishing a more detailed report on H&H later this month. The report will feature an analysis of Metabolon, a promising late-stage privately-held molecular diagnostics company that is complementary to Champions.
[Disclosure: Harris & Harris is a corporate research client of Research 2.0. Research 2.0 employees may own shares of Harris & Harris personally. Further disclosure information is available in the report cited above, and also on the Research 2.0 website.]
- Amgen/BioVex another positive catalyst for Harris & Harris (research2zero.com)
- Transforming Oncology Drug Development with Adaptive Trials (medelis.com)
- Where do Pathologists fit into Accountable Care Organizations? – Part 5 (tissuepathology.typepad.com)