Top Ideas in the Small Cap Biotech Space (INMB, OTLC, DVAX, SAVA, ICPT, IMGN)
The small cap biotech space offers a powerful dimension for active investors because it is comprised of stocks with little or no consistent correlation with the broad market, creating diversification without sacrificing explosive upside potential.
But the group is best handled in baskets. In other words, investors may stand to benefit from cultivating exposure to a handful of small cap biotechs with compelling pipelines because, at some point, if the basket is well selected, at least one of them is going to strike it big with a drug targeting a big healthcare need. When they strike gold with one of their assets, stocks in this space have the potential to produce massive and sudden moonshot returns.
And it only takes one such outcome to pay off the bet on the entire basket.
Furthermore, as alluded to above, these kinds of outcomes can happen at any time, whether the S&P 500 is in a bull or bear market. With this in mind, we take a look below at some of the most interesting stories in the small cap biotech space right now.
Dynavax Technologies Corp. (Nasdaq:DVAX) operates as a biopharmaceutical company, which engages in the discovery, development, and commercialization of novel vaccines and immuno-oncology therapeutics.
The company’s product line includes HEPLISAV-B, which prevents infection caused by all known subtypes of hepatitis B virus in adults 18 years of age and older.
Dynavax Technologies Corp. (Nasdaq:DVAX) recently reported financial results for the third quarter ended September 30, 2021 and provided a business update. A significant idea in the company’s release was about its strategy to expand the use of its CpG 1018 adjuvant platform and proven technology in multiple modalities of vaccine development.
As discussed by the company, through global partnerships, multiple data read outs for late-stage clinical trials of COVID-19 vaccine candidates adjuvanted with CpG 1018 generated impressive efficacy, immunogenicity and tolerability results. These clinical results enhance the data supporting CpG 1018’s ability to help enable new and improved vaccines that are effective and well-tolerated. This is especially important given the potential, highlighted by the recent emergence of the Omicron variant, for new vaccines to be needed in very short order.
While this is a clear factor, it has been incorporated into a trading tape characterized by a pretty dominant offer, which hasn’t been the type of action DVAX shareholders really want to see. In total, over the past five days, shares of the stock have dropped by roughly -5% on above average trading volume. All in all, not a particularly friendly tape, but one that may ultimately present some new opportunities.
Dynavax Technologies Corp. (Nasdaq:DVAX) managed to rope in revenues totaling $105.9M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 689.3%, as compared to year-ago data in comparable terms. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($414.2M against $528.9M, respectively).
Oncotelic Therapeutics Inc (OTC US:OTLC) is the smallest market cap name in our basket today – at about $63 million. But it may actually be the most promising from a future growth potential angle. The company has developed a first-in-class anti-TGF-β RNA therapeutic, OT-101, that has exhibited single agent activity in relapsed/refractory cancer patients. OT-101 also has shown activity against SARS-CoV-2 and has completed a phase 2 trial against COVID-19, with data analysis in progress. As a Covid asset, it should function agnostic of variants, which is obviously becoming an increasingly important factor.
It also recently announced the launch of a phase 2 trial for OT-101 in combination with Keytruda, a leading anti-PD-1 drug owned by biopharma titan Merck & Co., Inc. (NYSE:MRK), as a treatment for patients with Malignant Pleural Mesothelioma (MPM).
Oncotelic Therapeutics Inc (OTC US:OTLC) was also recently featured in an interesting article published on Asbestos.com, a web outlet sponsored by The Mesothelioma Center. The piece provides excellent perspective on the OT-101 program under development at OTLC, noting that the company’s anti-TGF-β RNA therapeutic could work to sharply boost the efficacy of checkpoint inhibitors like Keytruda, improving outcomes in not only mesothelioma, but a variety of other cancers.
“We’re excited about the potential. There is a huge unmet medical need with mesothelioma. The hope is that we can use this to increase the response to checkpoint inhibitors,” Dr. Anthony Maida, chief clinical officer at Oncotelic, told The Mesothelioma Center at Asbestos.com. “The goal is to help these patients live longer, better lives.”
Shares of OTLC have started to take off over the past two weeks, rising as much as 60% on a significant jump in trading volume over that period. The move featured a powerful breakout above the stock’s key 50-day moving average, which has now turned higher, presenting a very strong technical signal.
Oncotelic Therapeutics Inc (OTC US:OTLC) was also recently featured in an in-depth coverage report from independent analyst firm, Litchfield Hills. The fundamental analysis report rated the stock a “Buy” and assigned a price target of $4/share, which would represent further upside of more than 2,400% from current levels. Among other key points, the report notes that “the OT-101-ONC program has been moving forward steadily through strategic alliances with top pharmaceutical companies. Of note is the biomarker program spanning mesothelioma, glioblastoma, lung and colorectal cancers, where AI driven transcriptome analyses will be used to derive the predictive biomarker for TGF-β therapeutics such as OT-101.”
Immunogen Inc. (Nasdaq:IMGN) bills itself as a firm developing the next generation of antibody-drug conjugates (ADCs) to improve outcomes for cancer patients
Moreover, the company engages in the discovery and development of antibody-drug conjugates to improve outcomes for cancer patients. Its pipeline includes Mirvetuximab Soravtansine, IMGN632, IMGC936, and IMGN151.
Immunogen Inc. (Nasdaq:IMGN) recently announced positive top-line data from the pivotal SORAYA trial evaluating the safety and efficacy of mirvetuximab soravtansine (mirvetuximab) monotherapy in patients with folate receptor alpha (FRα)-high platinum-resistant ovarian cancer who have been previously treated with Avastin (bevacizumab).
“Despite advances in the platinum-sensitive setting, most patients with ovarian cancer eventually develop platinum-resistant disease, for which there are limited treatment options, especially for those patients who have previously received bevacizumab,” said Robert Coleman, MD, Chief Scientific Officer of US Oncology Research and SORAYA Co-Principal Investigator. “Data from SORAYA have the potential to redefine the standard of care for patients with FRα-high platinum-resistant ovarian cancer, as this trial has demonstrated that mirvetuximab delivers clinically meaningful benefit in this setting, with significant and durable responses and a favorable tolerability profile.”
And the stock has been acting well over recent days, up something like 8% in that time.
Immunogen Inc. (Nasdaq:IMGN) managed to rope in revenues totaling $9.2M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of -49.4%, as compared to year-ago data in comparable terms. In addition, the company has a strong balance sheet, with cash levels exceeding current liabilities ($245.8M against $111.8M).
Other key tickers in the small cap biotech space include INmune Bio Inc. (Nasdaq:INMB), Cassava Sciences Inc. (Nasdaq:SAVA), Intercept Pharmaceuticals Inc. (Nasdaq:ICPT), and iShares Biotechnology ETF (Nasdaq:IBB).
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