John Vandermosten, CFA, Senior Biotechnology Research Analyst, Zacks SCR
Nanocap biotech companies with public market capitalizations under $500 million with enough capital in the bank to launch a new product are a sweet spot for investors looking to take advantage of the current market fear.
For biotech companies the Phase III trial is the penultimate step to launching a new prescription drug.
Once Phase III trials are complete, the company creates a “Biologics License Application” or “BLA” submission for the FDA, the Federal Drug Administration.
Once the FDA has approved the drug for sale to the general public, the company can market the prescription drug to MDs throughout the United States.
John Vandermosten, CFA, is a senior biotechnology research analyst for Zacks SCR where he covers a portfolio of small-cap equities. His background includes 20 years of experience in a variety of investment management and research roles across all market cap ranges and throughout the capital structure.
In his 3,514 word interview, exclusively with the Wall Street Transcript, John Vandermosten points out that is has been difficult getting through the FDA process during COVID:
“The regulatory environment has been very difficult during COVID, and a lot of the attention and focus of the FDA has been on COVID and vaccine approval since early 2020, which diverted their attention from approving other drugs.
And also COVID has impacted clinical trials.
In 2020, a lot of those were delayed or held back, because frequently oncology patients are very sick and they don’t want to be exposed to the virus. So there were a lot of potential subjects that didn’t join trials and things were delayed.”
And then last year, it became very difficult to get goods and services — and this is apart from regulatory requirements. The FDA couldn’t do inspections, the FDA had to delay, a lot of times, some of the approval work that they were doing. So it made things very difficult for companies to get drugs approved.
Now that we have vaccines for COVID, the agency’s attention can shift back to regular approvals and we’ll see more focus on some of the products for existing diseases that need attention.”
One of the nanocap biotech companies that John Vandermosten covers has maneuvered through this difficult time and is poised to reap the rewards of its diligence.
“The third recent initiation is BioLineRx (BLRX). It recently completed a Phase III trial for stem cell mobilization in multiple myeloma.
Their lead candidate’s name is motixafortide, and it helps expand stem cells for use in transplantation. And results from their Phase III trials showed a 3.5-fold increase in stem cell mobilization in two apheresis sessions, versus standard of care.
It is 9.3 times more effective versus standard of care for mobilizing over 6 million cells in one apheresis session.
These are impressive statistics that show the drug can help patients needing a hematopoietic stem cell transplant.
BioLineRx (BLRX) conducted a pharmaco-economic study, which showed they could save $30,000 per patient compared to standard of care and improve outcomes…
BioLineRx (BLRX) and their drug motixafortide completed a Phase III trial and they’re preparing an NDA right now; targeting mid-year to submit their product to the FDA.
So as soon as that happens, we could see an answer from the FDA about 10 months later — they could actually have a revenue-generating product by second half next year. And they do have sufficient funds to get there.
Although sometimes companies like to raise a little bit more to give them some negotiating room.
I always think it makes sense to partner with a larger company that already has a marketing and sales group in place.
BioLineRx (BLRX) has said they can do it themselves if they need to, because it’s a relatively small group that they’ll be marketing to. But either way, things are looking good for them. And I think there’s a lot of upside there.”
Dr. Kumaraguru Raja, Senior Biotech Analyst, Brookline Capital Markets.
Dr. Kumaraguru Raja is a Senior Biotech Analyst at Brookline Capital Markets.
Previously, he was Vice President, Biotechnology Research at Noble Life Science Partners.
He started his equity research career in 2010 as a Senior Associate Analyst on the Citi Research biotechnology team.
His expertise includes bottom-up scientific and financial analysis on companies across therapeutic areas and across a spectrum of market capitalizations.
In his 1,876 word interview with the Wall Street Transcript, Dr. Raju has also identified a number of nanocap biotech companies that have drugs ready to go to market and therefore may have tremendous upside.
“Earlier, pharmaceutical companies used to acquire early-stage companies, and they still do, but to a smaller extent.
Typically, the approach nowadays is to wait for Phase III data. And the pipeline is then de-risked, and they are willing to pay more for a de-risked asset than paying less for an early-stage asset.
They are not willing to take that higher risk. And I am not saying that earlier-stage companies are not takeover targets, but we are seeing much less of that more recently.
But a lot of these companies are looking at collaborations too, not just takeovers.
So, in my coverage universe, Dare Biosciences (NASDAQ:DARE), in the women’s health space, has developed a drug for bacterial vaginosis.
It is called XACIATO.
They have a global license agreement with another company called Organon (NYSE:OGN).
So that has happened early this year. So that is a drug which was already approved by the FDA. And they entered into this collaboration agreement following the approval.
So that is one example where the collaboration has happened following the approval.
And some of my companies, they are also acquiring earlier-stage private companies so that they can expand the pipeline, because they have enough cash on the balance sheet and then they can leverage that to buy other smaller private companies, which are in Phase I or Phase II development.”
Nanocap biotech companies are high risk/reward ratios.
Because of the COVID-19 pandemic, they have been clobbered in the public markets over the past 12 to 24 months and investor expectations are close to multi year lows. The FDA is now in the position to review and permit new drugs for the market.
In the recent Biotechnology and Pharmaceuticals Report from the Wall Street Transcript, investors can get detail from both industry experts and the CEOs of many nanocap biotech companies, and determine how to best take advantage of the current fear factor in pharmaceutical stocks.
John Vandermosten, CFA, Senior Biotechnology Research Analyst
email: jvandermosten@zacks.com
Dr. Kumaraguru Raja, Senior Biotech Analyst
email: kumar.raja@brooklinecapmkts.com
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