EC Bioniche: A Home Run Buying Opportunity In Biotech

Number 2: Bioniche is a completely unknown stock. I like buying stocks nobody is paying attention to; these stocks are often present the best investment opportunities.

Number 3: Bioniche is such an obvious example of market mispricing. Phase III peer companies are valued at $150 million and higher, making clear how ridiculously low Bioniche's $25 million valuation really is. Such an irrational undervaluation makes the risk vs. reward profile highly asymmetrical.

Number 4: Bioniche is financially sound. They cleaned up their balance sheet, and raised cash very recently to bolster its cash balance. The company now has all the financial resources to pay for all operations into 2015.

Number 5: Management also has bought shares in the open market a few months back (link). Insider buying confirms the undervaluation.

Number 6: I expect the FDA to grant Bioniche market approval to commercialize its lead drug MCNA, as early as next year. I also expect MCNA to be designated as an Orphan Drug within 2 months.

Risk

A risk is the FDA not granting market approval. This could mean Bioniche needs to complete the second leg of its Phase III trial after all in order to file for market approval again. Not all would be lost if that happened, but it will cause delays, and Bioniche probably will need more cash to finance a new trial.

Further, there might be some selling pressure coming up from financiers exercising their warrants. There is a series of 1.6 million of $0.12 warrants and 3.3 million $0.23 warrants outstanding, ready to be exercised from end of October this year. It's not certain they will, but they could. The amounts aren't that material though compared to the daily average trading volume, so the selling pressure will be very temporary and it will raise cash for the company.

There are also a few long-term series of $0.30 and $0.40 warrants outstanding from a previous capital raise that could also cause some selling pressure, but buyers at today's price levels will have realized substantial gains by that point.

Summary

Bioniche could be the most undervalued stock currently trading on the market, and I think certainly the most undervalued biotech stock. Bioniche is rushing to obtain FDA approval, which could happen as early as next year, thanks to the fast-track route the FDA has given the green light for. There is a critical medical need for Bioniche's technology in a $1 billion market virtually free of real competition, which opens the door for massive revenue growth, while the sound financials limits downside risk. Overall, today's $0.20 share price appears to me as an excellent entry point for a genuine 10-bagger opportunity. One thing's for sure; opportunities of this magnitude are very rare.

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Disclosure: The author is long BNHLF

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Comments

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Chris Kisnik 6 years ago Member's comment
Risk can be good sometimes!