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Small Cap Biotech Stock Research & Analysis
35+ Research Reports $49/Month or $20/Report
There is no better value than our research for the investor interested in the small cap biotechnology industry. We have worked very hard to bring you genuine analysis, written in simple, plain English on dozens of small cap biotechnology opportunities (market caps of $100MM to $3.0Billion). Subscribe to our service ($49/month) for complete access to all of our research reports (including a narrated video presentation to go with each report) and monthly newsletter or purchase a research report, via PDF download, one at a time ($20/report). You will quickly learn we are very good at what we do. Save yourself days of tedious research. We've done it for you. We can assure you it is the best $20/company you can invest. We've thoroughly researched & analyzed more than 35+ small cap biotech companies and guarantee to add at least 2 new reports per month (we've added 4/month to date). Go to our Pro membership page to see what is included in each report. This caliber of research & analysis is not available anywhere. Take a minute to watch any one of a handful of our analysis on our YouTube page and/or read the feedback from investors like yourself for yourself. We've found the research reports sold by the traditional investor banks are so complicated and non-objective they are practically useless. We cannot promise the stock in a company we've researched and analyzed will go up or down, but with our analysis you will understand the stock's value proposition & potential (and of course our recommendation). Some of our current favorites include:
Agenus Inc. (AGEN) UroGen Pharma (URGN) Karyopharm Pharma (KPTI) BeyondSpring (BYSI) Strongbridge Bio (SBBP) OptiNose (OPTN) Akero Therapeutics (AKRO)
Small Cap Biotech Stock Research & Analysis
There is no better value than our research for the investor interested in the small cap biotechnology industry. We have worked very hard to bring you genuine analysis, written in simple, plain English on dozens of small cap biotechnology opportunities (market caps of $200MM to $3.0Billion). Subscribe to our service ($49/month) for complete access to all of our research reports (including a narrated video presentation to go with each report) or purchase a research report, via PDF download, one at a time ($20/report). You will quickly learn we are very good at what we do. Save yourself days of tedious research. We've done it for you. We can assure you it is the best $20/company you can invest. We've thoroughly researched & analyzed more than 35+ small cap biotech companies and guarantee to add at least 2 new reports per month (we've added 4/month to date). Go to our Pro membership page to see what is included in each report. This caliber of research & analysis is not available anywhere. Take a minute to watch any one of a handful of our analysis on our YouTube page and/or read the feedback from investors like yourself for yourself. We've found the research reports sold by the traditional investor banks are so complicated and non-objective they are practically useless. We cannot promise the stock in a company we've researched and analyzed will go up or down, but with our analysis you will understand the stock's value proposition & potential (and of course our recommendation). Some of our current favorites include:
Agenus Inc. (AGEN) UroGen Pharma (URGN) Karyopharm Pharma (KPTI) BeyondSpring (BYSI) Strongbridge Bio (SBBP) OptiNose (OPTN) Akero Therapeutics (AKRO)
You will learn our research is second to none. The video below is an explanation of why you should subscribe to become a Pro member of the Boston Biotech Investor. Please also take one minute to subscribe to our YouTube channel because you will find there is considerable value in the analysis we publish to the public. Thank you.
If you know what you want you can get started here by clicking on the applicable link below
NOTICE TO VERY WEALTHY INVESTORS
We are actively seeking a very wealthy investor (or family of investors or an investor group) to buy material common stock positions (5%+ stakes) in a handful of small cap biotechnology companies that, by any tangible measure, are drastically undervalued. We are not asking you to send us your money. We wish to represent you and your position to “pressure/force” these companies to seek a buyer (a common tactic with recently approved drugs or therapies) to optimize shareholder value. In addition to common stock positions we already hold in these companies, we will invest most of what we have left with you so our interests are fully aligned. At the moment (August 2021) we have identified 3 such companies that both have compelling therapies, approved by the FDA, with market caps at a mere fraction of their value in an arms-length sale of the company.
We apologize in advance but we will only discuss these 3 opportunities with those who subscribe to our service. If you are a member and are interested in learning more kindly send us an email at info@bostonbiotechinvestor.com. At this time a 5% stake in these companies will total just under $10MM/each. Both have market caps of just under $200MM. Our analysis concludes there is no chance we will lose because we are well aware of potential acquirers for these FDA approved therapies right now. There is no, as in zero, guesswork. You do nothing. We will work tirelessly for all of us to realize the enormous value in their companies. At their current valuations, obviously absent macro risks, the downside in these investments, long-term, is non-existent. We would be honored to work together with you on these projects.
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WE PROVIDE TWO BASIC TYPES OF INVESTMENT ADVISORY SERVICES
BUY & HOLD
BEHAVIOR TRADING
We have researched a number of companies that, based on our analysis, are undervalued so downside risk is mitigated, but more important offer material upside longer term. We never guess. Markets, especially biotech, go up & down day to day. The reality is stocks we recommend in this category may fall 20% the week after you buy them as biotechs are in and out of favor all of the time. That being said our analysis concludes they are prudent long-term investments. Our top pick right now is Agenus, Inc. (ticker AGEN). Our objective is to buy these stocks within a certain price range and hold for a specific period for each stock (usually at least 1 year).
We recommend “BUY & HOLD” stocks make up a total of 80% of your “biotech” portfolio.
We identify companies nearing a milestone or “catalyst” (usually the release of Phase 2 or 3 data or a FDA decision) that usually represents a material “value inflection point.” It is our experience that most biotech stocks in this category rise significantly on the anticipation just before the “news” or “catalyst” is announced. Our biggest recent successes were Chiasma, Inc. (CHMA) and Corbus Pharmaceuticals (CRBP). Both soared 20%+ in the weeks leading up to their milestone. We sell well ahead of the news. Some call this “buy on the rumor sell of the news.” Our objective is to trade around the investment behavior around the milestone or value inflection point…never the milestone itself (otherwise we are only guessing).
We recommend never investing more than 10% of your total “biotech” portfolio in our “Behavior Trading” portfolio spread over at least 5 companies (so your exposure is never more than 2% per company in this category).
Become a member & subscribe to learn more!
WHO ARE WE?
The Boston Biotech Investor is an investment advisory service specializing in the biotechnology, and at times more broadly speaking, the life sciences industries. We provide guidance to those interested in this high-reward industry. We are NOT a registered investment company (we do not take your money from you). Though we offer a service to manage your own investment account(s) for you, our service is ideal for those who manage their own investments. As a rule of thumb we recommend our typical client allocate up to 10 to 20% of the equity component of their total investment portfolio in the biotechnology/life sciences space we cover. Our recommendations are usually well insured against the broader stock market averages.
Our two investment philosophies are quite simple. First, we track a handful of companies that, based on our analysis, are not only undervalued so any downside risk is limited, but more important offer material upside over the following 12 months. Our second and truly unique value proposition is our “buy on the rumor sell on the news” trading strategy.
Most important we are fully aligned with you, our customer, because we follow the exact recommendations and strategies we recommend 100% of the time.
How Do We Value Small Cap Biotechs?
That is probably the best question to ask a service like ours. How in the world do you value a company that may or may not ever generate revenue? The simple answer is we generally, and of course not in every case, but generally value small cap biotech as a multiple of potential “peak sales.” As a general rule, the value of a new drug or therapy is based on the sales or revenues the subject drug or therapy can eventually generate should it be ultimately approved by the FDA. The best thing that can happen to a smaller cap biotech is get acquired by a larger pharmaceutical company. Larger pharmaceutical companies have hundreds if not thousands of sales reps all over the world. The incremental cost to add a new drug into the sales reps bags when making a sales call is virtually nothing. This is generally the cornerstone of the biotech/pharmaceutical business model. It is our experience that smaller cap biotechs are acquired at anywhere from 2 to 5 times “peak sales” with the multiple based on the longevity of the product’s patents. As a rule of thumb the longer the product is patented, or otherwise maintain a pricing related advantage, the higher the peak sales multiple.
We believe the best most recent example is Gilead’s acquisition of Immunomedics (or IMMU). On Saturday September 12, 2020 the Wall Street Journal first reported Gilead’s plan. Gilead offers $21Billion for IMMU. IMMU’s flagship product, that was incidentally initially rejected by the FDA, was anticipated to generate $4Billion/year in sales at its peak. Hence Gilead is paying just over 5 times IMMU’s Trodelvy (a breast cancer therapy) estimated peak sales. On the lower multiple side, Nestle agreed to buy AImmune and their flagship peanut allergy therapy called Palforzia for $2.6Billion. Estimated peak Palforzia sales were anywhere from $1.0Billion to $1.2Billion per year. Hence Nestle is paying less than 2.5 times estimated peak sales.
Just remember this is a directional overview of the “back of the envelope” of our valuation process and is different for every company. Investors also need to assess how likely is it that the therapy in question will ever be approved by the FDA to be used on humans. That being said it is always a great place to start.
To see how this may work in the real world, we would first look at BYSI’s Plinabulin estimated peak sales as it is one of our top picks. There are a handful of published Plinabulin peak sales estimates of over $1.0Billion. Considering BYSI’s valuation at $12/share (at the time this is being written), BYSI’s market cap is less than $500MM. Hence if Plinabulin’s NDA is approved there appears considerable upside in BYSI’s share price if someone was willing to buy BYSI for a multiple of Plinabulin estimated peak sales. We also like Agenus Inc. (AGEN) and their AGEN1181 therapy in development. AGEN1181 estimated peak sales are north of $1Billion/year. In AGEN’s case they have 2 other products that could be approved by the FDA within the next 12 -18 months.
To conclude, there is no 1 methodology for every company we research. Like any stock (biotech or otherwise), the optimal way to value small cap biotech is to determine the present value of its future cash flows. More often than not, this discounted cash flow analysis generally gets down to estimating a new product’s peak sales. Most of our videos available to the public walk you through our valuation analysis.
At the end of the day our service simply connects the dots to the potential value of a biotechnology type stock. Sometimes we call it the “ifs.” If product X is approved, and if peak sales are within published estimates (that we provide) then based on the company’s capitalization the stock will be worth $Y when/if approved. We do the research on all of the relevant value points by company and share them with you. You will know everything we do. It is well worth the investment for those serious about biotechnology.
The Difference Between Market Cap and Enterprise Value
Of course we recommend stocks based on their share price. We keep it truly simple for investors. However, virtually all the analysis we provide are based on a company’s Enterprise Valuation (or “EV”). You hear the term Market Capitalization (or “MC”) or sometimes called market cap all of the time…which is generally the total number of dilutive shares of common stock outstanding multiplied by the company’s share price. However, such a calculation may be materially misleading as we will demonstrate below.
Say a company has a MC of $300MM, $50MM cash in the bank but also has $450MM in long-term debt to a lender. You may look at the company and think a MC of $300MM is a steal…you buy the stock then a day later learn the company is going to be purchased for $400MM. You think you made a great investment. However, in such a case if the company is purchased for $400MM then, after the $450MM due the lender is repaid using the $50MM in the bank + the $400MM paid by the acquiror, there is literally $0 left over for shareholders. Instead of a big gain you lose everything.
This is why it is very important to understand the concept of enterprise valuation (again “EV”). EV considers that the company has cash in the bank and may have third party debt that must be accounted for when determining how much a company is truly worth. To calculate EV start with the company’s market cap, add long-term debt due a lender then subtract cash in the bank. In our previous example the EV would have been calculated by starting with the market cap of $300MM, adding the $450MM in long-term debt due a lender then subtracting the $50MM cash in the bank…to come up with an EV of $700MM. Again in our example had the investor considered the EV was more than twice the market cap, the investor may not have purchased the stock.
We shall now take this one step further. Generally, posted market caps on websites like Yahoo Finance, do not consider fully diluted shares when determining market cap or enterprise valuation. Virtually all companies in the life science industry offer stock options to employees as an incentive to attract and retain employees. It is also common for life science companies to offer “warrants” to buy their common stock to a lender. In some cases the strike price of the stock option or warrant is considerably less than the current share price (and sometimes not). All our analysis’ will calculate enterprise valuation using the “Treasury Stock Method” that assumes proceeds from the exercise of employee stock options & warrants are used to buy the stock in the open market. This may seem complicated. We make it quite easy to understand and this is how it is done in the real world.
At the end of the day (whether you become a member or not), if you remember one thing remember the difference between a company’s market capitalization and its EV could be substantial. Again this is why all of our analysis is prepared using a company’s EV. At the same time we of course make sure we convert it to the appropriate share price.
The Difference Between Shares Outstanding and Fully Diluted Shares Outstanding
A company’s “market cap” by itself provides the investor a directional overview of what a company is worth. Most traditional retail investors do not take the time to understand dilution nor the consequence of fully diluted shares outstanding. The easiest dilution phenomenon to understand are employee stock options. Stock options are given to employees to align ownership interests with rank and file employees by providing employees an incentive to build value in the business. A company may have 50 million shares outstanding but have granted company employees stock options with the right to buy say 10 million shares of company stock that vest over a period of time (usually 3 to 5 years). Because employees generally, not all the time but generally, won’t exercise their stock options until it is worth it for them to do so. Most stock screeners will report a company’s “market cap” as the number of shares outstanding multiplied by the share price. This common formula completely ignores the dilutive effect of employee stock options. Hence in this simple example if the company’s share price is $5 the company’s market cap (with 50 million shares outstanding) will be reported as $250 MM (MM = millions). if the company is sold for $500MM you may think you doubled your money and the share price should be $10. However in this case the value per share will be less than $10 because there will be 60MM shares outstanding after employees exercise their stock options. It is this simple. Of course 99 times out of 100 sophisticated investors are well aware of dilution but not retail investors. Taken one step further most late stage biotech companies have often issued “warrants” to buy the company’s stock to investors when raising money. Warrants are just like stock options from a dilution perspective.
Every company research report/analysis provides a complete breakdown of the effect of dilution. A great example of how dilution lowers proportional return to shareholders as the value of a company rises is Coherus BioSciences (CHRS). We love CHRS but dilution to CHRS shareholders will be significant should CHRS’s valuation increase as expected. CHRS trades for roughly $18/share. At $18/share CHRS’s market cap is $1.286Billion (as reported by most stock screeners), its fully diluted market cap is $1.345Billion and its enterprise value is $1.290Billion. If CHRS was sold for $2.5Billion which is very roughly 2X its market cap and enterprise value, shareholders only receive $30/share (considerably less than 2X its share price). The variance is due to enormous dilution as CHRS’s value increases. In an extreme example for informational purposes only, should CHRS be acquired for $5Billion, or very roughly 4 times its current market cap & enterprise value, shareholders would only receive $50/share which is, very roughly, 3 times its current value. The difference is completely due to “dilution.” Again, every report available on our website includes a review of per share value at various valuations to not only reflect the difference between market cap and enterprise value (noted above) but also dilution for convertible securities. This small part of our company analysis for every company we follow is, by itself, well worth the cost.
Very broadly, the concept of enterprise value & dilution are part of a biotech company’s capitalization strategy. Below is an example of how the 1 same company can be valued so differently based on its cash in the bank and third-party debt (market cap to enterprise value) and the consequence of dilution:
