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Friday’s Market Insights: Threshold Pharmaceuticals, Inc. (THLD), Innocoll Holdings PLC (INNL), xG Technology Inc (XGTI)

Threshold Pharmaceuticals, Inc. (NASDAQ:THLD) shares are rising 19% in Friday’s trading session, after the drug maker announced that it has entered into a definitive agreement under which Molecular Templates will merge with a wholly owned subsidiary of Threshold in an all-stock transaction. The transaction will result in a combined company focused on the development of novel treatments for cancer. Longitude Capital, a U.S. based venture capital firm, will invest $20 million at the close of the transaction, subject to certain conditions, including the receipt of additional equity financing commitments of $20 million.

“The merger of our two companies provides Threshold shareholders with a significant equity stake in a biopharmaceutical company with a promising cancer therapy, MT-3724, as well as an innovative and unique technology platform that has generated preclinical drug candidates to treat multiple myeloma, breast cancer and melanoma,” said Barry Selick, Ph.D. and Chief Executive Officer of Threshold. “Following an extensive and thorough review of strategic alternatives, we believe this transaction combines promising drug candidates, a solid management team and the resources to create significant value for shareholders and important new cancer therapies for patients.”

William Blair analyst John Sonnier recently noted, “We believe Threshold remains undervalued given the potential of its selective tumor targeting technology platform. With a potential partnership collaboration and regulatory path for evofosfamide, we believe in the opportunity for significant shareholder value creation.” The analyst rates THLD stock an Outperform, without providing a price target.

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst John Sonnier has a yearly average return of 18.4% and a 54% success rate. Sonnier has a 4.9% average return when recommending THLD, and is ranked #392 out of 4558 analysts.

Innocoll Holdings PLC (NASDAQ:INNL) shares tumbled over 25% to $1.37 Friday, after the company indicated that it has participated in a Type A meeting with the FDA regarding the re-submission for Xaracoll, the company’s product candidate for the treatment of postsurgical pain. Specifically, Innocoll disclosed that it has proposed conducting an additional PK study and several short-term non-clinical studies, which would delay the resubmission of its NDA.

As a reminder, in late December, Innocoll announced it received a Refusal to File letter from the FDA for Xaracoll NDA. In the letter, the FDA stated that Xaracoll should be characterized as a drug/device combination, which would require Innocoll to submit additional information to the FDA.

In reaction, Stifel analyst Annabel Samimy downgraded INNL stock from Buy to Hold, while slashing the price target to $2.00 (from $9.00). The analyst noted, “Despite this proposed path forward, in light of its 4Q16 cash of $15.8mn, INNL does not have sufficient runway to complete these regulatory requirements. As a result, the company is in discussions that may or may not lead to a firm offer for the company. At this point, we believe INNL needs to find strategic alternatives, but we cannot be certain of its consummation.”

As of this writing, all the 4 analysts polled by TipRanks (in the past 3 months) rate Innocoll stock a Hold. With a return  potential of 59%, the stock’s consensus target price stands at $2.00.

xG Technology Inc (NASDAQ:XGTI) saw its shares rising over 10% today, after announcing that it has reached an agreement with Pebble Beach Systems (“the Seller” and formerly known as Vislink) for extinguishing the remaining deferred debt from the acquisition of Vislink. All deferred payments due from xG against the original promissory notes covering the acquisition of Vislink are now settled in full, and all liens are released. The agreement included cash and sharing the proceeds from a customer receivable, among other considerations.

George Schmitt, Executive Chairman and CEO of xG Technology, said, “We are pleased to announce the final settlement of all debt arising from the acquisition of Vislink. We have done this without adding any additional debt to our balance sheet, leaving us in an even better position than we expected when we originally made the acquisition. We want to thank the team at MB Technology Holdings for spearheading the negotiations involved in the acquisition on xG’s behalf, especially in reaching this most recent agreement with the seller. Their ability to bring these very difficult and time-consuming negotiations to a successful conclusion is the key reason we have been able to increase our revenue base almost tenfold.”

Roth Capital’s William Gibson recently said, “We believe the acquisitions of Integrated Microwave Technologies and Vislink Communications Systems position the company to generate cash and turn GAAP profitable in the second half this year and beyond […] In our opinion, xG Technology’s valuation reflects investor concerns about its history of losses; accumulated losses total $201 million through 3Q16 and at year-end 2015, its auditors, Marcum LP, questioned the company’s ability to continue operating as a going concern. With the added revenue and the likelihood of turning cash flow positive, we believe execution is paramount.”

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