With the dominance of the giants in the Covid vaccine space, biotech stocks have outperformed the market this year by a wide margin. But almost all of that outperformance has been isolated in the large-cap factor zone in the space, leaving small-cap biotech players to badly lag the market.
The Nasdaq Biotech Index, which is similar to the iShares Biotechnology ETF (NASDAQ:IBB), is up nearly 9% this year, with Moderna Inc (NASDAQ:MRNA) in pole position, while the SPDR S&P Biotech ETF, which carries a much heavier weighting of smaller cap biotech names, has declined 13% year-to-date. In the Russell 2000 index of small-cap stocks, the health-care sector is the only one in the red for the year with an 8.7% decline.
However, according to a growing number of top analysts, as covered by Bloomberg, including Hartaj Singh at Oppenheimer, Patrick Nosker at Affinity Asset Advisors, and Jason Butler at JMP Securities, investors may want to keep a close eye on the group in the months ahead.
This underperformance is likely to change heading into the fall, with small-cap biotech stocks potentially set to flip the script and play an aggressive game of catchup. Given the beta of this sub-group, that type of role-reversal may spell a huge opportunity for investors able to time and parse the action well.
We take a look below at a few particularly compelling names in the group with interesting catalysts in play.
INmune Bio Inc (NASDAQ:INMB) focuses on controlling components of the immune system to activate an immune response against cancer and Alzheimer’s disease.
The company’s product pipeline INKMUNE-Cancer, INB03-Cancer, XPRO1595-Alzheimer, and LIVNATE.
INmune Bio Inc (NASDAQ:INMB) recently announced that XPro (pegipanermin), the Company’s selective DN-TNF inhibitor candidate for the treatment of Alzheimer’s disease (AD), treatment resistant depression, and other neurological diseases where neuroinflammation is implicated, has been found to decrease multiple species of Phospho Tau (pTau) and improve neuroimaging biomarkers of myelination in patients with AD.
“CSF pT217 appears to be the more sensitive tau biomarker of neurodegeneration in patients with AD, and our data show that controlling neuroinflammation decreases pT217,” said CJ Barnum, PhD, Head of Neurosciences for INmune Bio. “Tau pathology has been associated with decreased white matter integrity in AD and we believe these data are consistent with our biomarkers for the measurement of white matter pathology in patients with AD. White matter pathology starts early, the changes are measurable, and appear to be reversed following treatment with XProTM.”
Even in light of this news, INMB has had a rough past week of trading action, with shares sinking something like -9% in that time. That said, chart support is nearby, and we may be in the process of constructing a nice setup for some movement back the other way.
INmune Bio Inc (NASDAQ:INMB) had no reported sales in its last quarterly financial data. In addition, the company has a strong balance sheet, with cash levels exceeding current liabilities ($39.5M against $3M).
Adhera Therapeutics, Inc. (OTC US:ATRX) may be one of the most underappreciated names in the space given its recent moves to license potentially game-changing IP for rapid development of new solutions in critically underserved markets. The company bills itself as a clinical stage biopharmaceutical company focused on identifying advanced drug candidates that may qualify for accelerated developmental pathways.
The company’s legacy assets include CEQ508, an oral delivery of small interfering RNA (siRNA) against beta-catenin, to suppress polyps in the precancerous syndrome and orphan indication Familial Adenomatous Polyposis (FAP). In addition to MLR-1019 (armesocarb), which is being developed for the treatment of Parkinson’s Disease, the Company is actively exploring additional pipeline additions.
Adhera Therapeutics, Inc. (OTC US:ATRX) most recently announced it has executed an exclusive license agreement with Melior Pharmaceuticals I, Inc., thus defining the terms and conditions for which Adhera will license MLR-1023 (tolimidone) from Melior for the purpose of developing a novel therapeutic for Type 1 diabetes.
According to the release, MLR-1023, a lyn kinase activator, has demonstrated exceptional clinical safety and tolerability in over 700 patients in Phase 2a and Phase 2b Type 2 diabetes studies. Adhera will focus its initial clinical trials on patients with Type 1 diabetes where the Company can benefit from a number of factors, including the existing safety profile to move directly into Phase 2 clinical trials, a shorter and less expensive clinical pathway compared to Type 2 diabetes, independent research demonstrating a robust therapeutic effect by MLR-1023 in a Type 1 diabetes animal model, and large addressable market due to the lack of alternative treatment options in Type 1 diabetes aside from insulin injections or an insulin pump.
In Type 1 diabetes patients, the pancreas produces little to no insulin. At a cellular level, the immune system attacks pancreatic beta cells that produce insulin, leaving the patient with deficient levels of insulin to control blood glucose and dependency upon exogenous insulin. Approximately 20-30 percent of Type 1 diabetes patients have demonstratable amounts of beta cell mass as determined by detectable amount of the insulin synthesis byproduct, C-peptide. Research indicates the potential for MLR-1023 to induce proliferation of a patient’s remaining beta cells. Melior and Adhera hypothesize that if the beta cell mass can be expanded in the C-peptide positive patient population, it may be possible to either reduce or eliminate the exogenous insulin requirement.
Adhera Therapeutics, Inc. (OTC US:ATRX) CEO noted, “MLR-1023 could represent a major leap forward in diabetes care, particularly for the 320,000-480,000 people in the U.S. expressing C-peptide that indicates they have residual levels of functional beta cells. Researchers have for a number of years tried unsuccessfully to identify a safe and well tolerated agent that induces replication of human beta cells. MLR-1023 could be the first to do so. Clinical trials have demonstrated MLR-1023 as an insulin sensitizer and we greatly look forward to initiating a Phase 2 trial to evaluate it as an inducer of beta cell replication.”
Cassava Sciences Inc (NASDAQ:SAVA) engages in the development of novel drugs and diagnostics.
The company focuses on developing product candidates intended for the treatment of Alzheimer’s disease, including PTI-125 and PTI-125Dx.
Cassava Sciences Inc (NASDAQ:SAVA) recently released a statement regarding plasma p-tau analysis from a previously disclosed randomized, controlled Phase 2b clinical study in patients with Alzheimer’s disease. For this study, Cassava Sciences contracted with Quanterix Corp., a highly regarded, independent laboratory, to perform sample testing on blinded samples.
According to the company, the Phase 2b clinical study was conducted by Cassava Sciences. Quanterix’ sole responsibility with regard to this clinical study was to perform sample testing, specifically, to measure levels of p-tau in plasma samples collected from study subjects. “To ensure data integrity, it is standard industry practice to keep separate the people who generate the data from the people who analyze the data,” said Remi Barbier, President & CEO. “That certainly was the case here. Anything different is a distortion of the facts.”
Even in light of this news, SAVA has had a rough past week of trading action, with shares sinking something like -18% in that time. That said, chart support is nearby, and we may be in the process of constructing a nice setup for some movement back the other way.
Cassava Sciences Inc (NASDAQ:SAVA) had no reported sales in its last quarterly financial data. In addition, the company has a strong balance sheet, with cash levels exceeding current liabilities ($278.3M against $4.6M).
Other interesting names in the space include Dynavax Technologies Corporation (NASDAQ:DVAX), Intercept Pharmaceuticals Inc (NASDAQ:ICPT), and ImmunoGen, Inc. (NASDAQ:IMGN).
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