Investing in biotech stocks can be tricky. Clinical-stage companies are often underfunded and over-speculated. Those that do have products on the market and are doing well, have already seen substantial gains in value, and many of them are starting to fall back down.
The elusive Mobi Dick of the biotechnology investing world is the stock that is onto something good and has the funding to make it through catalysts that prove it. If a company can make it from development to approval, the potential gains can be tremendous.
Just take a look at Bristol-Myers Squibb (NYSE: BMY) 40 years ago, the stock was trading at $1.93 per share. By October 28, 1999, the stock reached its all-time high, trading at $77.94 per share. Those who purchased the stock 40 years ago, and sold it 20 years ago, made a killing.
In fact, if you were to purchase $1,000 of BMY in 1979, you could have sold it for over $40,000 in 1999. While there have been ups and downs since, BMY has never been able to match this all-time high.
We see much of the same story from Pfizer (NYSE: PFE) 40 years ago, the stock was trading at just $0.69. On April 12, 1999, PFE closed at an all-time high of $50.03 per share.
Those who purchased PFE in late 1979 and sold in late 1999 also made a killing. $1,000 in PFE in its early days could have been sold for more than $70,500 in 1999.
Perhaps one of the most impressive stories through the history of biotech investing was the story of Amgen (NASDAQ: AMGN). In 1983, the stock traded at $0.34 per share. Since then, it has been on a pretty strong, upward trajectory. Today, the stock trades at over $197 per share.
An investor who purchased AMGN in 1983 has seen an incredibly strong gains. In fact, a $1,000 investment then would be worth more than half a million dollars today!
While the opportunities to get into these biotech stocks at dollars or pennies may be gone, there are others in the penny range that have the potential to become a similar success story. In my opinion, one such stock is Spherix (NASDAQ: SPEX).
What Is Spherix
Spherix is a clinical-stage biotechnology company with a focus on developing treatments for some of the most difficult-to-treat types of cancer. In September, SPEX announced the acquisition of CBM BioPharma.
With the acquisition of CBM came two key assets. These assets, known as:
- KPC34 – KPC34 is an orally administered treatment under development for Acute Lymphoblastic Leukemia (ALL) and Acute Myeloid Leukemia (AML). Although AML and ALL are considered to be very difficult to treat, KPC34 has already shown promise. Data suggest that the drug comes with multiple methods of action in cancer cells. First, KPC34 is believed to inhibit DNA replication. The drug is also believed to interfere with an important enzymatic process.
- DHA-dFdC (Gem-DHA) – In animal studies, DHA-dFdC has been shown to inhibit tumor growth in aggressive pancreatic cancers. The data suggest that the treatment is significantly more effective than the chemotherapy drug, gemcitabine. This is important as gemcitabine is one of the current standards of care. Not only did DHA-dFdC show higher accumulation in the pancreas, it also showed slower clearance from the pancreas relative to other organs. These were unexpected, yet positive results. Interestingly, the drug has proven to be effective in animal models that have developed resistance to gemcitabine.
Based on currently available data, both of these treatments under development have the potential to become highly valuable options for patients and for investors.
Digging Into The Market Opportunity
The assets under development at Spherix have the potential to be blockbuster treatments, based not only on the positive data surrounding the treatments, but also based on the indications that they target.
KPC34 targets AML and ALL, markets that are expected to grow to $3.5 billion and $2.2 billion respectively over the next few years. DHA-dFdC targets the high-value pancreatic cancer indication. In fact, the pancreatic cancer market is expected to grow to be worth $4.73 billion by the year 2026.
To put the opportunity into perspective, in November of 2018, the United States FDA approved Xospata for patients with relapsed or refractory AML FLT3 mutation. In 2019, the drug is expected to generate around $140 million in full year sales. $22 million of this total was generated in the first quarter of 2019.
SPEX stock currently trades with a market cap of around $4 million. If it were to break into the AML, ALL, or pancreatic cancer market, it could generate tens or even hundreds of millions of dollars per year, ultimately generating tremendous value for the company and its investors.
Does Spherix Have What It Takes Financially?
Spherix is in a relatively unique position, not often seen in the biotechnology space. In the past, the company operated as a technology agnostic patent company. Generating revenue through the licensing of its patents, the company was not actively involved in product development.
Instead, the company operated more as a mix between a license company and a hedge fund. Successfully managing its funds in the market, the company made several profitable capital investments.
One of the most important of these investments was the purchase equity in Hoth Therapeutics. The company initially invested about $700,000 into Hoth, which quickly grew to be worth more than $10 million.
All in all, the company’s strong money management has led to it holding around $13 million in assets. This gives the company a strong financial foundation from which to build and reach several catalysts ahead.
Interestingly, Spherix is in such a strong financial position that it recently announced a special dividend, offering shareholders an immediate return of value. That’s not something you see every day from clinical-stage biotechnology companies.
This Opportunity Could Be Tremendous
When we think about great opportunities in biotechnology, we often look toward large cap companies with several treatments on the market. The problem with this strategy is that these large cap companies have already gone through their big run. In fact, many of them have started to tumble over the past several months, and few are trading anywhere near all time highs.
While these opportunities are behind us, they won’t be the last of their kind. There are gems in the market like SPEX that have the potential to generate incredible growth in the long run coupled with the financial stability to avoid any fears associated with a need for funding ahead. All in all, Spherix has a real chance of being the next BMY, PFE, or AMGN-style story!
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Disclosure – Alpha Stock News is not an investment advisor or broker/dealer. CNA Finance, parent company to Alpha Stock News has a monetary relationship with Spherix.