Ideas Elsewhere: Theseus Pharmaceuticals (THRX)

Strategic Review – 14%+ Upside

Generals and Workouts has shared a pitch on Theseus Pharmaceuticals. It is another busted biopharma, which recently suspended development of its leading candidate, laid-off 72% of its staff and announced a strategic review. The company trades at around 27% discount to current net cash. While the outcome of the review is uncertain, outright liquidation would likely be the most favorable path to shareholders. 4 major shareholders, mostly large biopharma investors, own 61% of the company.

THRX currently trades at $3.62/share. Net cash as of Q3’23 was $5.17/share. Deducting outstanding liabilities, three additional quarters of cash burn, restructuring costs, and remaining severance/wind-down expenses, would result in $4.14/share liquidation value as of Q1’24, which implies 14% potential upside in a liquidation scenario. There may also be additional upside from PP&E, prepaid, and other assets (collectively valued at $0.16/share on the books) and/or monetization of THRX’s IP assets.

The key risk in this situation is management opting for some kind of value-destructive transaction instead, e.g. reverse merger (although, not all reverse mergers end up value destructive).

8 Comments

8 thoughts on “Ideas Elsewhere: Theseus Pharmaceuticals (THRX)”

    • It looks like its trading right at that 3.8 level, does that mean there is a risk free play on the CVR + upside if the Orbimed/Foresite cash portion is higher? Is the market truly discounting the CVR value at $0?

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  1. Another development at THRX indicates that we might soon see some kind of strategic transaction being announced:

    – The president/CEO and CMD have been terminated but will provide consulting services until March 31, 2024.
    – The current CFO will assume the role of president. Notably, the newly appointed president is eligible for a retention bonus equal to 1.5x his annual salary (approximately $750k) if he remains employed in good standing until the earlier of the closing of a strategic transaction or February 28, 2024.

    https://www.bamsec.com/filing/110465923123002?cik=1745020

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  2. Tang acquiring for $4/share in cash plus CVR and trading below $4. Is it accurate deal should close in Feb, so free CVR?

    CVR must be a long shot or….no?

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    • “(“CVR”) representing the right to receive 80% of the net proceeds from any license or disposition of Theseus’ programs effected within 180 days of closing of the merger and 50% of the potential aggregate value of certain specified potential cost savings realized within 180 days of the close of the merge”

      Does the 180 day limit neuter the value? Does Concentra have any reason/obligation to move on these before day 181 (assuming there is actually any action at all)?

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      • I agree with your point. It presents a situation with conflicting motivations for the buyer. On one hand, there’s the prospect of cost savings, which is favorable. On the flip side, realizing these savings triggers payouts under CVR. Very difficult to understand whether THRX IP could actually fetch anything in a sale. FWIW, the market appears skeptical about assigning any value to the CVR and it’s pretty hard to argue with that.

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  3. THRX has set the final cash consideration at $4.05/share. Consequently, the tender offer has been extended till February 15. At this point, it’s just a formality, and the transaction should close smoothly in a few weeks. Currently, 37.2% of shareholders have validly tendered their shares, in addition to the 59% who pledged support at the bid announcement. The stock trades slightly above the cash offer, with investors now paying just 2 cents for the CVR.

    https://www.bamsec.com/filing/114036124004440/3?cik=1745020

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