Potential Deal Brewing: Gritstone's Game-Changing Vaccine in the Spotlight

Okay so the data that Gritstone presented at ID Week was, as expected, fantastic. Yet now the stock is dropping. What explains this? Manipulation? A “sell the news” event? ATM dumping by Gritstone itself? Broader market biotech collapse?

Something fishy is going on here because this stock cannot exist at its current valuation. If you look at the biotech market, there is almost no funding. No investment. The number of small biotech companies exploring “strategic options” has never been higher. Valuations are so out of whack, that yesterday a company rallied nearly 4,000% after releasing data. That’s how much the market has been slammed.

If you’re a microcap biotech company that’s years away from revenue, and you have less than a year of cash left, then you are probably finished and it doesn’t matter how promising your tech appears. Because everyone’s tech is promising when it’s on the drawing board.

That’s what differentiates Gritstone Bio from the rest of the herd. They landed a $433M contract from BARDA because their 12-month antibody data for their novel Covid-19 vaccine was fantastic. If you haven’t seen the abstract yet, check it out here. Moderna and Pfizer antibodies fade as quickly as three months. That’s why for the last three years you’ve been hearing stories about people getting a Covid vaccine and still getting sick. Yes, there is long-term protection against severe disease, but not against mild infection. That’s where Gritstone comes in.

Their press release is conservatively worded. It says: High IgG and neutralizing antibody responses were induced and sustained for at least 12 months. “At least.” They have to say that because you can’t say things that aren’t verified by science. But we all know the antibodies last longer than 12 months.

Day 365: Antibodies at 100%.

Day 366: Antibodies at 0%!!

No. Not happening. This technology has been proven to work and the US government committed to investing $433 million in a company that at the time was worth about $120 million. Keep in mind it’s a government run by democrats. And if there’s one thing democrats hate, it’s pharmaceutical companies making too much money. Yet, here they are handing a winning lottery ticket to one. If the Phase 2 study goes well, then there’s probably another half a billion waiting in the rafters for a Phase 3 study. Just like what happened to Moderna.

Do you really think that BARDA would line up $433M and a 10,000-patient study for a company that would be bankrupt before the study finished? Obviously not. You don’t loan money to someone on death row.

So, when you look at a stock like Gritstone, you need to imagine where the price should be. Does it belong in the gutter with the companies doing reverse splits, cheap offerings, or exploring strategic options? Because that would put the share price closer to $1.20 or less.

Gritstone’s share price cannot stay at the $2.40 level. It either must crash (technology is garbage and there will be no non-dilutive funding) or it must go back to the $5-10 range because markets are forward looking. Companies with profits, or companies with potential always trade at a multiple of their intrinsic value. The microcap biotechs exploring “strategic options” are trading at or under cash because they’re slowly going bankrupt. Gritstone is currently trading at 2x cash. Yes, they’re burning $30M per quarter and if nothing changes then they run out of money at the end of 2024.

2x cash ($220M) is not an appropriate valuation for a company that might steal the ENTIRE covid-19 vaccine market from Pfizer and Moderna. Think about it. When the Gritstone vaccine is approved, why would a government purchase the inferior/legacy vaccine from Pfizer or Moderna? The antibodies only last a few months. They require extreme refrigeration. You need a booster probably every year.

Gritstone solves all of this with samRNA. The only reason this stock isn’t trading between $10 to $30 is their balance sheet. They need cash for a few years until they can bring a product to market.

Let’s say the market in 2024 and 2025 for Covid-19 vaccines is $30B. Moderna gets half, and Pfizer/BioNTech get half. How much do you think each company would pay to protect that $15 billion? Although a better question is, how much would they pay to not only protect their $15 billion, but also steal $15 billion in market share from their competitors.

Gritstone needs cash, and either Moderna or Pfizer needs to protect their profits. There is absolutely going to be a deal between Gritstone and SOMEBODY. It’s likely there is a bidding war going on behind the scenes. First there was the BARDA contract, which if Gritstone wasn’t on big pharma’s radar, it was then. Then the abstracts from ID week were released showing stable antibodies at 12 months. Now there is probably some panic in the board rooms.

“Holy shit, we’re screwed.”

“These guys are going to steal the entire Covid market.”

“What do we have that’s even close to this?”

“Nothing.”

“Fuck.”

Since big pharma is flush with analysts then it probably didn’t take them long to figure out that Gritstone needs cash. Which means big pharma got lucky on this one. This is one of the worst bear markets in biotech history. And big pharma has billions in Covid cash.

Gritstone needs cash, and big pharma needs to protect their Covid-19 profits, and steal market share from their competitors.

Which means Gritstone is probably open to taking a higher upfront cash payment, and less milestone/royalty payments. It’s win/win for everybody except whichever large Covid-19 pharma company doesn’t land the Gritstone deal.

This isn’t a buyout play, it’s a wait for the deal play which is absolutely 100% coming because they’d be stupid not to do it.

Gritstone might take as low as $200M upfront. Which would be a steal. $200M to protect $15B in revenue and steal $15B in revenue from your largest competitor? It’s a no-brainer. You ask them what they want and then you pay it. Because if you don’t pay it, then your competitor will.

This is like a game of musical chairs except the floor is made of lava and if you don’t get chair then someone chops your arm off. Big pharma HAS to make a deal. Not doing a deal would be insane. Especially since they’ve seen the 12-month antibody data. And the US Government is paying for the trial which means approval will be faster and easier.

Imagine being able to buy a goose that lays golden eggs and the only cost involved is feeding it and housing it and the US government is like “No problem, we can pay for that.”

This is the most no-brainer investment in the history of investments. Which is exactly why after the BARDA contract was announced, the stock took off like a monkey from a box.

Gritstone will get a deal and the deal will be massive. And then it’s goodbye share price. They’re already partnered with Gilead. Imagine they were partnered with Pfizer and they had $300M in the bank. You’re telling me this company would only be worth $220 million? Go to the hospital. You have brain damage.