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SNGX: New Financing Boosts Balance Sheet

By Grant Zeng, CFA


The Offering

In early July, Soligenix (NASDAQ:SNGX) closed an underwritten public offering of 7,766,990 shares of its common stock and warrants to purchase up to an aggregate of 3,106,796 shares of its common stock at a combined offering price of $1.03. In addition, the underwriters partially exercised the over-allotment to purchase additional warrants to purchase 466,019 shares of common stock. The warrants have a per share exercise price of $2.25, subject to customary adjustment, are exercisable immediately and will expire forty-two (42) months from the date of issuance.

Gross proceeds to Soligenix from this offering were approximately $8 million.

Balance Sheet Boosted Immediately by the Offering

As of March 31, 2018, the Company's cash position was $6.4 million. With the cash from this offering, the cash position should be around $12 million at the end of June 2018.

Current cash position is able to support the company’s operation for at least one year according to our financial model.

Valuation is Attractive

We remain optimistic about Soligenix’s long term prospect. We believe there are multiple catalysts to drive the share price up in the next 6 to 12 months.

Soligenix becomes a late development stage biotech company through the acquisition of SGX301, a Phase III candidate for CTLC. With the addition of another Phase III of SGX-942, Soligenix is focused on cancer/cancer supportive care and GI disorders, two large pharmaceutical markets both in the US and around the world. Soligenix also develops vaccines/oral therapeutics for biodefense.

In addition to SGX301, Soligenix has built a diversified pipeline using three proprietary platform technologies: the SGX942 platform, the oral BDP platform and the ThermoVax platform. We are optimistic about its drug candidate SGX942 for the treatment of oral mucositis. The positive data reported from the Phase II trial is a significant de-risking event for Soligenix. SGX942 has a new mechanism of action and will command a significant market share of the oral mucositis market if approved in our view.

The Company’s oral BDP has the potential to target multiple GI disorders such as Crohn’s disease, radiation enteritis and GVHD as well as ARS.

Soligenix’s vaccines and biodefense therapeutics are being developed under specific FDA regulatory guidelines called the “Animal Rule.” We think the “Animal Rule” means a lot for Soligenix, because this can accelerate the development of the ricin and anthrax vaccines as well as OrbeShield. Once approved by the FDA, Soligenix will have the opportunity to negotiate a stock-pile contract with the US government. These stock-pile or procurement contracts have been very lucrative for other companies supplying similar drugs to the US government and will provide significant cash flow to Soligenix.

Based on our analysis, we believe Soligenix shares are undervalued at current market price. Currently shares of Soligenix are trading at around $1.05 per share, which values the Company at $16.8 million in market cap based on 16.5 million outstanding shares. This deeply undervalues Soligenix shares in our view.

Our price target of $12 per share values Soligenix at $198 million in market cap which we think is still very conservative.

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