Spherix (NASDAQ: SPEX) is a stock that has gotten quite a bit of attention lately, and for good reason. It’s not often that we see a small biotech stock declaring dividends and trading at a valuation of less than half its book value.
Over the past couple of months, we’ve been talking about the opportunity brought on by the stock. Admittedly, the opportunity discussed has had to do with the dividend and financial stability offered by the company. However, we’ve missed out on a big topic of discussion. What happens after the dividend?
Recently, SPEX issued a letter to shareholders, outlining the opportunity that they are working to bring to investors. Here’s what’s going on and what we can look forward to ahead:
Talking About The Dividend
First and foremost, the letter to shareholders reminded investors of the dividend. Importantly, the record date for the dividend distribution will be October 21, 2019. Shareholders of record as of 5pm on October 21, 2019 will receive one share of Hoth for every 29 shares of SPEX owned.
Keep in mind, Spherix will not be distributing fractional shares of Hoth common stock. Instead, any fractional shares will be rounded down to the nearest whole share.
Outside of the dividend, there’s plenty to look forward to when it comes to Spherix. In particular, the company’s recently announced acquisition of CBM assets brings high value oncology assets to the table.
In particular, these assets have shown incredible promise in the treatment of acute myeloid leukemia, a market that is expected to grow to be worth $2.2 billion by the year 2025.
A key asset outlined in the shareholder letter is the lead compound acquired from CBM, known as KPC34. The treatment is under development as a potential option for patients with acute myeloid leukemia. Data seen to date suggests that the treatment has promise in treating relapsed/refractory AML with a certain type of mutation.
To understand the of showing promise in this indication, all you have to do is take a look at three recently-approved treatment options:
- Tibsovo – Tibsovo, developed by Agios Pharmaceuticals was submitted to the FDA on December 26, 2017 and was approved on July 20, 2018. In the second quarter of 2019, the company generated $13.7 million in revenue for the drug and is only expecting this revenue to grow. Like KPC34, Tibsovo was developed to treat relapsed/refractory AML with a certain mutation of the disease. In this particular case, the mutation is known as IDH1.
- Xospata – Xospata, developed by Astellas, was submitted to the FDA in April of 2018. By November 28, 2018, the drug was approved for commercialization. In the first quarter of 2019, Xospata generated $22 million in revenue. For the full year, Astellas expects that Xospata will lead to $140 million in revenue. Like KPC34 from Spherix, the treatment is designed to treat relapsed/refractory AML with a certain mutation. In this particular case, the mutation is known as FLT3.
- IDHIFA – IDHIFA was developed by Agios and licensed to Celgene. The treatment was submitted to the FDA on December 30, 2016. By July 28, 2017, the drug was approved. While Celgene has not provided solid numbers as to sales, Agios received $2.7 million in royalty payments in the second quarter. Considering that royalties are in the low double digits to mid teens, we can say that the treatment generated between $18 million and $27 million in the second quarter. Like KPC34, IDHIFA targets relapsed/refractory AML with a specific mutation. In this particular case, the mutation is known as IDH2.
These are key comparisons as they do not address the same mutation targeted by KPC34, but do show the potential of a treatment in relapsed or refractory AML subtypes. Considering that Spherix currently trades with a market cap of just under $5 million, an opportunity to tap into tens of millions of revenue per quarter is a tremendous one.
The Bottom Line
The bottom line here is that we rarely come across opportunities like this in the market. Due to its strict financial discipline over the past several years, Spherix is sitting on a financial foundation that will allow it to build. Moreover, with the recently announced acquisition of oncology assets from CBM, the company is gearing up for multiple catalysts, which have the potential to lead to a compelling revenue story. All in all, this is a stock that should not be ignored.
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Disclosure – CNA Finance, parent company to Alpha Stock News, has a monetary relationship with Spherix.