I Have a Prescription for These Two Biopharmas That Fell After Earnings

Sifting through quarterly earnings reports for my small- and mid-cap biotech holdings last week was like drinking through a fire hose. Such a huge number of new data points needed to be analyzed. Some companies exceeded expectations and rallied, as I highlighted in my column on Friday, while others missed the consensus.

I highlighted one of these decliners in my piece on Sunday on ADMA Biologics ADMA and why I initiated a new position in this name via covered calls after the stock fell 15% following a slight revenue miss, despite 40% year-over-year growth. In today’s column, I will profile two other small-cap names that moved down post earnings and that presented buyable dips.

We will start with Syndax Pharmaceuticals SNDX, whose stock sank some 20% last week, despite posting first-quarter results that beat both the top and bottom-line consensus on Monday. It should be noted that last week was a lousy one for biotech and biopharma stocks. The SPDR S&P Biotech ETF XBI was off some 8% last week, a huge drop for this well-diversified ETF in what was a mixed market.

Syndax has two drugs approved and on the market. The first is leukemia medicine Revuforj (revumenib), which was green lit by the Food and Drug Administration late last year. This was approved to treat a type of acute leukemia relapse with what's called a lysine methyltransferase 2A gene (KMT2A) translocation. Management believes this is potentially a $750 million market. The second drug on the market is called Niktimvo, which is approved to treat chronic graft-versus-host disease or cGvHD. It is marketed by collaboration partner Incyte INCY. This drug was launched earlier this year.

Both drugs are in several trials evaluating them for additional indications. In addition, Syndax Pharmaceuticals ended the first quarter with just over $600 million in cash and marketable securities on its balance sheet. Management has stated it should need no additional capital raises until the company reaches profitability. After last week’s decline, the stock has a market cap of just north of $900 million, which seems much too cheap.

Ardelyx ARDX was another biopharma I added exposure to last week via covered call orders. The stock has fallen sharply since posting somewhat disappointing quarterly results at the start of the month. Revenues came in under expectations, despite rising just over 60% on a year-over-year basis. Raymond James was quick to point out that the first quarter is usually a weak one for the IBS-C market, which Ardelyx operates. Management could do a better job controlling expenses, but Ardelyx did end the quarter with over $210 million in cash and marketable securities on its balance sheet. The company should approach break even status late in fiscal 2026 and director purchased just over $1.9 million of stock directly following quarterly results, which is a nice vote of confidence. I will give the company another quarter to restore my faith.

At the time of publication, Jensnen was long AMDA, ARDX, SNDX, XBI.