There's Value In These 2 Small Beaten Down Biotech Stocks

The market continues to ebb and flow with the direction of trade tensions. Yesterday, markets rallied strongly on some encouraging remarks from the Chinese delegation about the prospects for further trade talks. Hopefully, this is a sign of true progress instead of one of the many 'false starts' during this ongoing process. Personally, I take anything either negotiating side says these days with a very large grain of salt.

That said, we will channel some guarded optimism today for Friday's column. With Hurricane Dorian baring in on my home state of Florida and possibly my home in Miami, one must hope for the best and prepare for the worst. Speaking of optimism, here are a couple of beaten down stocks from the biotech/biopharma sector seeing some recent insider buying for consideration.

Let's start with Supernus Pharmaceuticals (SUPN) . The stock is down some 30% from its highs earlier in the year. In early August, the company delivered mixed Q2 results. It beat on the bottom line, delivering 61 cents a share of profit in the quarter. Revenues just missed expectations and the company did reduce full year sales guidance to $400 million to $410 million from $435 million to $455 million. This means sales will be roughly flat with FY2018.

However, management expects earnings in the range of $150 million to $160 million for FY2019. The stock has a current market cap of $1.4 billion. In addition, Supernus holds just over $850 million in cash and marketable securities against approximately $350 million in debt bringing its enterprise value down to the $900 million range. Add in a potential lucrative new ADHD product (SPN-812) and a new entry in Impulsive Aggression (SPN-810) on the horizon, the stock seems very cheap at current trading levels. The CEO bought nearly $190,000 worth of shares on August 23rd. It is the first insider buying in SUPN since 2013, when the stock trading at under $6.00 a share.

Up next is Aquestive Therapeutics (AQST) which I have recently taken a small 'watch item' position within. Aquestive is a small specialty pharmaceutical company that came public about year ago. As you can see from the chart above, it has not been a pleasant journey for shareholders to this point.

The company's initial focus is to improve medications for patients with central nervous system conditions. The company has a drug currently on the market called Sympazan, which uses the company's PharmFilm technology as a prescription medicine used along with other medicines to treat seizures associated with Lennox-Gastaut Syndrome in people two years of age or older. In addition, the company also has two licensed commercial medicines that have been approved: Suboxone which is an opioid dependence treatment and Zuplenz which is used to prevent treatment-related nausea and vomiting. Both drugs use PharmFilm technology. The company should deliver approximately $40 million in sales in FY2019 from its current product portfolio.

Aquestive submitted an NDA for its drug candidate Exservan in April. This compound is a novel formulation of riluzole, which is used as an adjunctive therapy in the treatment of amyotrophic lateral sclerosis. This drug candidate should be approved in late November. The company also has a compound called Libervant in the pipeline. Libervant would be the first oral therapy approved by the FDA for the management of seizure clusters or breakthrough seizures in the population of 1.2 million refractory epilepsy patients. If approved, the company envisions Libervant being available to patients in 2020. Management thinks the drug will deliver $200 million to $300 million in peak net revenues within three years to four years post-launch.

The stock currently has a market cap of just $100 million. From August 12th through August 27th, several insiders including the CEO purchased over $150,000 in stock. These were the first insider purchases so far in 2019.

At the time of publication, Bret Jensen was Long AQST, SUPN.