Spherix Inc (NASDAQ: SPEX) is a stock that I’ve been following closely. More recently, many have jumped on board, and for good reason. Over just the past few days, the company provided multiple updates, outlining a shift in focus. Considering these changes, the story is quite a bit different than it was when I published my first feature article on the topic.
Here’s What’s Stayed The Same With SPEX Stock
While there are a lot of changes to discuss below, it’s important that you know what has stayed the same. Here are a few things that we find important:
- Spherix Is Still Highly Undervalued – In my previous article, I explained that Spherix operated somewhat like what we would expect to see from a fund. A diverse investment portfolio offered a high value proposition that was not being seen in its share price. My opinion on this has not changed.
- Spherix Still Owns A Decent Chunk Of Hoth – One of the larger investments outlined was one made in Hoth Therapeutics a short while back for around $700,000. Today, it’s worth around $10 million and the market cap of Hoth Therapeutics has grown to around $50 million. There has been no change to any of this.
- Dividend – It is rare to see a small biotech play offer a dividend. I personally can’t name a time when a saw a company in the industry with a similar market cap do so. Nonetheless, SPEX has plans to propose a dividend. The only thing that changed about this is that, due to a recent vote, that proposal is likely on the horizon.
Here’s What’s Changed
Previously, Spherix relied on its investments and long list of patents to generate value for investors. While the company invested in biotechnology companies like Hoth and CBM Biopharma, and owns several patents in the biotechnology space, it hasn’t been acting like a biotechnology company.
For some time, Spherix has acted as a mix between a patent house and a hedge fund. It did not take part in development and ran no clinical studies. Instead, the company’s success came through partnerships with other companies that did so. This is where the game is changing in a very big way.
In a press release issued on September 9, 2019, SPEX announced the results of a Special Meeting of Investors. Shareholders have approved the acquisition of CBM Biopharma.
However, the value provided through the acquisition is incredible. CBM Biopharma is currently in the process of developing two treatment candidates:
- KPC-34 – Under early development for acute myeloid leukemia (AML) and Acute Lymphoblastic Leukemia (ALL), KPC-34 has shown early promise. At the moment, Gemcitabine and Cytarabine are at the epicenter of treatment of AML and ALL. When compared to Cytarabine, KPC-34 has shown promise as a superior option.
- DHA-dFdC – DHA-dFdC is currently under development as a new drug for pancreatic cancer. At the moment, treatment options include surgery, radiation therapy and chemotherapy, all of which are known to extend survival and relieve symptoms. Unfortunately, these treatments seldom result in a cured patient. Moreover, surgical tumor removal is only possible in under 20% of the patient population. All in all, there is a large medical need for positive therapies in this space. Positive preclinical study results suggest that DHA-dFdC is effective in inhibiting pancreatic tumor growth in clinically relevant transgenic mouse models.
These Indications Open The Door To Tremendous Opportunities
Should SPEX develop either one of these treatments to the point where it reaches commercial stages, terms like gains in multiples wouldn’t begin to describe the opportunity here. Just take a look at the size of the markets that these drugs will tackle.
According to iHealthcare Analyst, the AML market is expected to grow to be worth $2.2 billion annually by the year 2025. According to Grand View Research, the ALL market will grow to be worth $3.4 billion annually by 2025. Grand View Research also expects that the pancreatic cancer market will grow to be worth $4.2 billion by 2025.
Considering the fact that SPEX has a market cap of around $5 million, tapping into even 1% of either of these markets would be massive for the company. So, should Spherix make it to market with either one of these options, the value of the stock would see tremendous growth.
Spherix Is Hitting The Ground Running With Another Potential Acquisition
While Spherix works to transition into a full-fledged clinical development company with a focus on oncology, the company made another announcement on September 11, 2019, showing that it is hitting the ground running.
On top of the assets that come along with the CBM acquisition, Spherix may be acquiring the rights to another anticancer drug, known as G4-1. In fact, the company signed an exclusive option agreement with the University of Kentucky surrounding the asset.
Under the terms of the agreement, the Option gives SPEX access to two United States patents, both having expiration dates in the mid-2030’s. As part of the agreement, Spherix will perform due diligence, making a decision on whether or not to execute a license agreement for commercial development of the drug.
Anthony Hayes, CEO at SPEX pointed out that data surrounding the drug is “extremely encouraging, especially the drug’s benefits over already-approved drugs.” The drug has shown strong efficacy in mouse models of prostate cancer, outperforming the current standard of care. Should all go well, and the drug be licensed, it would represent yet another opportunity for the company to break into another high-value indication.
Breaking Down The Gross Undervaluation Taking Place In SPEX Stock
With recent news, the gross undervaluation of Spherix has only expanded. First and foremost, it’s important to keep in mind that according to Nasdaq, the company has assets amounting to about $13.25 million. Total equity comes to about $12.1 million. Yet, when you look at the market cap, you see that it trades at the sub-$5 million level. That alone suggests that there is a serious undervaluation here. However, the acquisition of CBM Biopharma only expands that undervaluation.
With the acquisition of CBM, SPEX is paying a very low price to bring two oncology candidates that are showing early promise into the frey. As mentioned above, these assets are targeting incredibly high-value indications should they reach the market. Once this deal closes, the value brought to the table by these assets should be realized by investors. Not to mention the value brought to the table by the potential licensing of G4-1.
Finally, with a dividend likely around the corner, Spherix is showing that not only is it making moves to grow the value of the company, it is actively working to return this value to investors.
All in all, SPEX is a stock that is worth diving into!
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Disclosure – CNA Finance, parent company to Alpha Stock News, has a monetary relationship with Spherix.