Nikolay Tomov
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Med Biogene Inc. Stock (CVE:MBI) Advanced, But at What Cost?

by Nikolay Tomov Mar 7, 2011
In the world of business there is nothing certain. Risk is almost everywhere. It depends on you and your leader's abilities to minimize it. If you are smart enough, you will probably avoid signing deals that might eventually bring you more losses than short-time immediate gains. However, this is not always so simple as it seems.

Med_BioGene_-_Chart_n.pngThe managers of Med Biogene Inc. (CVE:MBI) have made up their minds. Last Tuesday, they announced their decision to enter a strategic agreement with Precision Therapeutics Inc. that gave the latter exclusive global rights to develop and commercialize Med Biogene's LungExpress DX technology.

Obviously, the news was warmly received by investors and had a strong positive impact on the company's shares. The day when it was released, MBI made a stunning 233% jump on the TSX Venture Exchange, noting a 6-month high of $0.14 during the session. Much more striking was the trading volume of 20.77M shares that changed hands.

Although the stock lost some of the gain during the following days, it remained well above its early February level, when MBI was traded at $0.035. The shares ended last week at $0.075.

Unfortunately, the good story ends here. Now, time for the bad news. The fore-mentioned deal brought Med Biogene Inc. ("Med") serious troubles as well. They began before the deal was officially announced.

Med_BioGene_-_Logo.pngOn Feb.11, Signal Genetics LLC and its subsidiary Respira Health LLC filed a lawsuit against Med BioGene in the Supreme Court of the State of New York alleging "a breach of agreement" and "misuse of proprietary information." Signal Genetics claims that in January it had entered into a term sheet with Med, under which Signal had been granted an exclusive right to use the LungExpress DX technology.

The future will show who is right and who is wrong. It is clear, however, that the accusations against Med Biogene might hurt it at least two ways: 1) they will probably threaten the company's reputation; 2) the lawsuit will perhaps cost Med a large amount of money.

All this might hurt the future performance of the shares as well. Moreover, Med Biogene looks financially not solid enough. At the end of last September, it reported a working capital deficiency of $1.55M.

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