Blue Water Biotech (NASDAQ: BWV) is up 62% on the announcement of a deal. Well, OK, deals can be interesting, deals can be transformative. What puzzles though is why this particular deal is thought to be a grand and sensible one. Because the outcome of the deal is that Blue Water Biotech now has to show that it's good at doing something that it apparently has no experience doing. Nor the requisite infrastructure or skills - at least, not to any obvious indications.
Blue Water is - or was - a vaccine development company. A good and interesting thing to be and the stock was up at $50 and $60 a couple of years back for good and obvious reasons. That it wasn't one of the winners in that race is also why the stock is down around the $1 level currently. Oh well, that happens, they still work on influenza vaccines and so on. Great.
So now there's a deal which pushes the stock price up that 60%. Although as we can see from the chart below there was a lot more interest on first announcement which then rather faded away during the day.
Blue Water Biotech stock price from NASDAQ
Well, OK, deals are deals, so what was this one? “Blue Water Biotech (NASDAQ:BWV) has announced the signing of an Asset Purchase Agreement with WraSer and Xspire Pharma for the purchase of six FDA-approved assets across multiple indications, including cardiology, otic infections, and pain management.”
That looks an odd reason for the stock price to soar to us. Now, if Blue Water were a drug marketing powerhouse then adding a few lines to that system would make sense. This is why the likes of Glaxo etc buy up biotechs when they get FDA approvals - they are the marketing powerhouses and they add lines to their offerings. Equally, if Blue Water had a drug or vaccine that was ready to roll then buying a marketing arm would also make sense. But the drugs being bought aren't in the right vertical sector for that second to be true. And as far as can be seen Blue Water has absolutely no marketing ability at all, let alone prowess. They're a development house, not a marketing one.
Now, yes, OK, we understand the attraction of the transformative deal. But this $8.5 million package of drugs, presumably there's a value add here. Either Blue Water can market them better than the previous owners, or that marketing system can be used to market Blue Water's products. And we just don't see any overlap at all between the abilities and assets and either of those two possibilities.
Sure, of course we could be wrong but we see this as doing a deal to have done a deal rather than anything else.
