BioMS Medical (MS.TO)

BioMS -- Time to Take a Look?

A couple of weeks back Eli Lilly (LLY) cut what seemed to be a very good deal with a Canadian company, BioMS (MS.TO) for rights to its multiple sclerosis (MS) drug in trial, MBP8298. Catchy name, eh? The stock did a Rodney Dangerfield and did not react. Should you?

On Dec. 17 LLY and BioMS announced a partnership where BioMS would complete development of an MS drug in two Phase III, late-stage trials, and one mid-stage, Phase II trial.

Lilly would get exclusive worldwide rights in return for an upfront payment of $87 million and milestones of $410 million, plus escalating royalties. The stock ran up a buck -- more than a third -- from $2.70 to $3.72, but the cash added to the company was worth a buck, so the enterprise value of the stock did not move. I know markets act strangely when stressed (as they are now) but it was still a weird market reaction.

The stock has begun to creep up -- it is trading around $4 -- but the validation provided by this sort of agreement and the late stage of the drug did not seem to affect investors. The agreement was approved by the Federal Trade Commission in late January

Should it have an affect you? I do not recommend or own the stock, but I thought it was worth a look -- and if the drug gets approved, the stock is a five-bagger, right out of the gate.