The Biotechnology space has been hammered this year along with growth technology stocks as fund managers follow the historical playbook on rising rates – higher risk-free returns from fixed income instruments pulls investor duration forward, which means money flows from stocks that have a great long-term story but aren’t really producing much cash from operations to value stocks, which have big cash flows already coming in the door.
Biotechnology companies with early-stage pipelines – ie, nothing past Phase 2 trial research – are basically ground zero for a growth-stock thumping in any sudden transition from a persistent low-rate environment to a higher rate context.
That’s exactly what we have seen so far this year. And small-cap, early-stage biotechnology stocks have been brutalized en masse in the process. But that tide may be starting to turn.
NBIO is #Winning
Which brings us to Nascent Biotech Inc. (OTCMKTS:NBIO), an early clinical stage biopharmaceutical company with a number of potential drivers and catalysts in play, including its flagship asset, Pritumumab (“PTB”), now nearing the close of an apparently successful Phase 1 study targeting primary and metastatic brain cancer.
Experienced investors take Relative Strength very seriously. In a down market, stocks in a deeply red sector that have strongly outperformed the herd tend to be leaders in the next bull cycle.
Early-stage small-cap biotechnology stocks have been about as crimson this year as any other market group. NBIO fits the description of an archetypal relative strength leader in that same space, up 400% this year against wind and tide.
That sets an interesting stage if the macro context turns a corner and we start to see an environment more conducive to growth stock performance in the months ahead.
In that vein, we have seen a series of analyst reports and financial media pieces out over recent days speculating that the rise in interest rates may be at an end. Yesterday’s JOLTS job openings print represented the biggest month-over-month drop in history, suggesting that the job market is starting to cool off, which the Fed has identified as one of its most important goals in the rate hiking process.
Biotechnology, overall, has started to outperform the major indices over recent weeks as well.
All of this sets up well for emerging relative strength leaders in oversold areas of the market, with NBIO representing a prime example of the genre. With that in mind, we take a deeper look into the factors behind the stock’s tremendous performance this year.
What’s Behind the Strength
From a bird’s eye view, Nascent Biotech Inc. (OTCMKTS:NBIO) is heavy on R&D. The company’s Phase 1 study on brain cancer emerges out of many years of research and background due diligence.
As noted above, NBIO’s top asset is Pritumumab, which targets brain, lung, breast, and pancreatic cancer. PTB is a natural human antibody that binds to Cell surface Vimentin (also referred to as ectodomain vimentin), a protein expressed on the surface of epithelial cancers. PTB is used as a targeted immunotherapy that seeks out cancer cells without damaging healthy cells.
If we look around the corner at value upon commercialization, the total addressable market (“TAM”) the company is targeting with its initial brain cancer research program is set to surpass $4 billion over the next decade and a half.
Based on company updates over recent months, there’s nothing to suggest that the company’s mAb platform isn’t on schedule at this point. Just this week, Nascent announced that it has already enrolled the first patient of its fifth and final Phase I patient cohort in the PTB Brain Cancer study.
Sean Carrick, Nascent’s CEO, noted in the release, “We are enthusiastically encouraging anyone interested in screening for the trial to do so in a timely manner. This cohort of patients will likely be the final one in this trial, and new patient enrollment will cease until our Phase II research gets underway.”
The company also added that it is ready to start preparing data for FDA submission to get its Phase 2 research off and running once dosing has been completed for this cohort.
NBIO is trading on a market cap right now of just $36 million. Imagine where shares might go if and when the company puts out news that it is officially starting phase 2 research in a $4 billion market.
To sum up this story, NBIO has been way out in front of its market space during a period of widespread abandonment of growth stocks, especially early-stage biotech names.
The company has done well because it’s cheap – dirt cheap for a company legitimately moving toward a possible phase 2 trial in a massive end market. It has also done well because its clinical research program appears to be sailing along so far.
Finally, biotechnology, as an industry, is widely thought to be entering a period of consolidation and shares of companies like NBIO may see institutional interest on speculation of potential acquisition from larger players in the space.
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