2 Names To Consider In A Heating Up Small-Cap Biotech Sector

TM Editors' Note: This article discusses one or more stocks that are, or have recently been, penny stocks. Such stocks are easily manipulated; do your own careful due diligence.

Karuna Therapeutics (KRTX), NextCure (NXTC), and Constellation Pharmaceuticals (CNST) are but the latest examples of how the biotech sector has been heating up. All 3 of these names have seen very strong stock appreciation on early impressive data.

KRTX just reported that its developmental drug "KarXT, designed for the treatment of acute psychosis in schizophrenia patients, demonstrated "statistically significant and clinically meaningful reduction" in total positive and negative syndrome scale (PANSS) score compared with a placebo."

Subsequently, the stock price exploded from around $20 a share all the ways to a pre-market high of $140 in a few days.

NXTC reported what at first seemed like positive early data, but after further data release, it was determined that their data was not as good as their Society for Immunotherapy of Cancer (SITC) abstract first appeared. The abstract was based upon seven patients. However, when the data was expanded to N = 49, there were no further responses observed beyond the initial two. Nevertheless, the stock made a huge move from around $20 a share to as high as $109, before crashing back down to around $35 a share.

CNST had the most impressive data of the latest biotech big runners, with strong early data from an N = 4 Phase 2 clinical trial for myelofibrosis in combination with Incyte's (INCY) Jakafi. In this study, all four patients showed a strong response to combination therapy.

CNST's stock price before positive data announcement was around $15 a share and went on a run to as high as $45.42. Unlike the first 2 companies mentioned here, CNST has held its value rather well, currently trading around $40 a share.

In this write-up, we offer 2 under-the-radar developmental biotech companies we think have the potential to see some strong bids come in rather soon.

Calithera Biosciences (CALA) is a company we have extensive knowledge of and have been following since 2015. The company is nearing an important inflection point with the upcoming results of the randomized Cabozantinib + Telaglenastat combination study in 2nd line Renal Cell Carcinoma (RCC) due in the 2nd half of 2020. Notably, the company revealed that it is seeking a partnership deal in order to advance its 3rd pipeline asset CB-708, an ecto-5'-nucleotidase (CD73) inhibitor into the clinic. Pre-clinically, the small molecule has shown some promise when compared to the more common approach of antibody inhibition of this target. AstraZeneca's (AZN) antibody, MEDI9447, is the most clinically advanced of the bunch. However, it appears that an antibody approach here is a sub-optimal means to inhibit this extracellular enzyme.

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Disclosure: I am/we are long CRIS, CALA.

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Rachel Anne 7 months ago Member's comment

Nice find.