This Small-Cap Biotech Is on the Cusp of a Breakout
With upcoming partnerships and innovation programs, a relatively unknown stock could soon gain more attention from the market.
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Indices are mixed at the start of the week and the new month, but it is the big-cap technology stocks that are leading after some poor recent action. Nvidia NVDA has rebounded about 3.5%, and Meta META is helping the Nasdaq 100 QQQ as well. The semiconductor and healthcare industries are leading, while energy and financials are lagging behind.
Breadth is still running positive, although the Russell 2000 (IWM) has gone from green to red. Heavy speculative action in GameStop (GME) and AMC (AMC) burned traders who chased the open, but both stocks are still holding on to gains. There is much talk about the return of Roaring Kitty to Reddit (RDDT). He supposedly posted a graphic of very large holdings in GME, but there is no longer any mention of "diamond hands," so there is reason to believe that the big spike is being sold.
We continue to have some decent trading in smaller stocks, but it is quieter today outside a couple of meme names.
I want to provide an update on small-cap biotech Xeris Biopharma (XERS), which I have mentioned many times. I have been following XERS for several years, and it has been a disappointment despite its tremendous potential. I now believe that it is on the cusp of being recognized as more information is released about its in-house drug development, as well as the potential for licensing its drug delivery system.
XERS already has three revenue-producing drugs, including Gvoke for the treatment of low glucose and Recorlev for the treatment of Cushing’s syndrome, which are growing fast. XERS has a third drug, Keyeyis, which has generic competition, but it is holding up better than expected.
These drugs produce about $180 million in annual revenue, and if the company was doing nothing else, it would be profitable and would probably receive a higher valuation. The company is still spending on R&D and marketing its drug delivery system, so it is using capital. Currently, the stock is far below several comparative situations, and HC Wainwright stated that, "Xeris is highly undervalued on the current business alone" and has a $6 target on the stock.
What is most exciting about Xeris is the programs that it has in the pipeline. No revenue from these programs is currently estimated.
Last week, XERS announced positive Phase 2 results for subcutaneous levothyroxine for the treatment of thyroid eye disease. This is a huge market, and the oral form of the drug is one of the top-selling generics. The Xeris formulation has several substantial benefits, such as being once-weekly and making dosage easier to control.
It will take a while for this program to develop, and analysts are not yet discounting any revenue. However, the short-term catalyst here is that Xeris may look for a partner to help develop and market the drug. The company is presenting later this week at a Jeffries event, and this is very likely to be a topic of discussion.
In addition to this in-house drug development, Xeris is working with Amgen AMGN, Regeneron REGN and Beat Bionics on products that use its drug development system. These programs are highly secretive, but indications are that they are developing, and the potential for a license agreement or partnership is good, but the timing is unknown.
I’ve been trading the stock for years and believe that it is very close to gaining more attention from the market. The valuation is compelling, but the stock needs more attention from Wall Street.
At the time of publication, Rev Shark was long XERS.
