My 2 Favorite Small-Cap Biotech Stocks Are Soaring: Here's an Update
I'm long both these names and am very optimistic about the longer term.
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The senior indexes and big-cap technology stocks are struggling on Thursday, but there is strong rotation into small-caps IWM. Breadth is running around two to one overall, but Nasdaq 100 QQQ breadth is close to even. The DJIA is being hit hard with a loss of 1% due mainly to weakness in Salesforce CRM and Microsoft MSFT.
It is very encouraging to see this strong relative performance in smaller stocks while the media is focused on worries about inflation and the valuation of big-cap names. The fact that there is speculative interest in the smaller stocks that have underperformed for years is very healthy.
Two of my favorite small-cap biotechnology names are performing very strongly Thursday. I've covered them in detail in the past, but I wanted to update their status.
Humacyte HUMA has developed bioengineered human tissues and has an application for a biological license with the FDA for its Human Acellular Vessels (HAV) that is due on August 10. The stock has always had a great story, but the acceptance of the Biological License Application earlier this year put it on the radar.
However, what really lit HUMA was a buy by U.S. Senator Tommy Tuberville of Alabama. Tuberville is on the Senate Armed Services Committee and it's possible he may have been familiar with the fact that the Huma HAVs were being used in studies done in Ukraine for war injuries.
Many folks are outraged by politicians trading stocks because of the appearance of impropriety, and they may indeed have some non-public inside information at times. I don't think that is the case with HUMA, however, but Tuberville's buy received tremendous attention, and the stock has exploded. I believe it still has much more potential upside, and I will continue to trade it aggressively while waiting for the FDA decision in August.
The second stock that is one of my long-term favorites is Xeris Biopharma XERS. Xeris already has three drugs on the market that are selling very well. However, the company's great value lies in its drug delivery system. The Xeriject and XerSol technology allows drugs to be formulated for injection under the skin. No refrigeration is needed, and typically, the injection volumes are smaller.
Several companies, including Amgen AMGN, are evaluating the technology for use with drugs they have developed.
On Thursday, Xeris announced successful Phase Two results for XP-8121 for the treatment of hyperthyroidism. Currently, this condition is treated in daily pill form with levothyroxine, which may cause gastric issues and can be hard to dose. This is one of the top-10 generic drugs in current use. Xeris is able to put the drug into a weekly injectable form that has more accurate dosage controls.
Xeris is still in the early stages of the development of XP-8121, but it could announce a partnership or license agreement at any time. The stock is very cheap based on its current products alone, in my view, but it has huge potential if it can make a deal with its drug delivery technology.
I'm long with both names and am very optimistic about the longer term.
At the time of publication, Rev Shark was long HUMA and XERS.
