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Rosetta Genomics: Final decision, buy or hold off?

Rosetta Genomics: Final decision, buy or hold off?

This is the sixth in a series of posts analyzing Rosetta Genomics stock.

The best thing that Rosetta Genomics has going for it is that it has a huge amount of intellectual property. They have patents on (or have licensed rights to) hundreds of miRNAs. Essentially, at this point, an investment in Rosetta Genomics is an investment in miRNAs. If you believe that miRNAs are useful for diagnostic tests or as targets for therapeutics, then you should invest in the (self described) leader of the industry.

The hardest part is determining how to value the stock. Since they have partners for almost every project and the details of the partnerships aren’t disclosed, it’s difficult to determine what the potential income is for the diagnostic tests they’re developing. (I’m ignoring the potential income from their therapeutics pipeline since that’s years away.)

That being said, I think there’s potential in miRNAs as a diagnostic test. I’ll predict that the first test to get approved will be for measuring the aggressiveness of a tumor and not for detection. The limiting factor, in my opinion, will be their ability to purify enough miRNAs to detect differences in the expression levels. Clearly it’s much easier to get enough cells for measuring miRNA levels in a resected tumor than getting enough miRNA from tumor cells that are sluffed off into the blood stream, which would be required for a blood test for cancer detection.  On the other hand, they (or at least their PR people) seem to think they’ve got it down.

I’m going to take a small stake in the company. I think it’s likely that there won’t be much movement on the stock (maybe a drift downward) until they announce that they are starting clinical validation of their first diagnostic product. It’s not clear how quickly that will occur and I don’t want to miss the boat, but I also don’t want to park a lot of money in a stock that’s moving sideways, so the position will be small. As of this writing it’s at $6.50/share which is below it’s IPO price of $7/share.  It’s been trading in the $6.50-$7.00 range for the last month, so I will try to buy on one of the dips.

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