Monday, July 17, 2006

Calls of Note Part 4

- RBC Capital notes the lack of appetite in the market for binary risk has put Genitope (NASDAQ:GTOP) shares at all time lows in advance of what could be its most significant clinical/corporate event -- the second interim analysis of its pivotal Phase III trial. Firm continues to expect positive results for Genitope's MyVax at this interim analysis during the week of July 24, and believes that a statistically significant and clinically meaningful increase in progression-free survival could trigger a re-valuation of the company, driving the stock into the high teens per share. The downside from these prices is more limited given the approximate $3.30 cash per share. Although there is significant binary risk, they believe the risk/reward is highly favorable at current prices.

Assuming upside to $18 and downside to $4, the current $6 share price implies that the market is assigning an 85% probability of a negative outcome. Firm believes this inefficient pricing strongly supports a favorable risk/reward for investors willing to accept binary risk.

Believes that the stock may not get to $18 immediately and there will be significantly liquidity at lower valuations at approximately $12 per share or more. Using a downside value of $4 per share (a small premium to its current cash balance of approximately $3 per share) and an upside value of either $12 or $18 per share, they think the market is currently estimating the probability of success at approximately 15-25%. Firm believes this is extremely low. Even if one assigns a 50% probability of success to the event (which they think is still too low), the stock should be trading above $10 per share given downside to $4 and upside to $18.

Reits Outperform.

Notablecalls: For you gamblers out there. A real falling knife.

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