Seeking Alpha
Recommended for you:
-
dasdasdasdadas
Deep value, event-driven, dividend investing, REITs
Profile| Send Message|
( followers)  

As investors await the upcoming quarterly results from major biotech companies such as Edwards Life Sciences (NYSE:EW) (due out February 4th) I wanted to take a closer look at three small-cap biotech companies that possess zero debt, and carry some very promising pipelines. For this analysis, the companies needed to meet the following criteria:

  • Currently have total debt to total cash (TD/TC) ratio of 0.00
  • Currently trade under $8.50/share
  • Currently have a market cap under $625 million

After developing this screen, I found three small-cap biotech companies that currently possess total debt-to-total-cash ratios of 0.00. When it comes to TD/TC ratios I consider any ratio under "1" very healthy, under "2" satisfactory, under "3" cautionary, and anything over "3" a warning sign.

Company

Symbol

Price

Mkt Cap

(Millions)

Total Debt

Total Cash (mrq)

TD/TC Ratio

Keryx Biopharmaceuticals

(NASDAQ:KERX)

$8.49

$610.64

0.00

$20.25 M

0.00

EntreMed Inc.

(NASDAQ:ENMD)

$2.08

$46.81

0.00

$8.81 M

0.00

Oncolytics Biotech, Inc.

(NASDAQ:ONCY)

$3.60

$276.09

0.00

$28.51 M

0.00

Keryx Biopharmaceuticals: It should be noted that shares of Keryx closed Wednesday's trading session at $8.49/share, currently have a market cap of $610.64 million and have been given a TD/TC ratio of 0.00 which is based on the statistical calculations of my formula. The company's fundamentals include a total of $20.25 million in total cash on its books (it should be noted that the company currently has a negative operating cash flow of $26.82 million and a negative free cash flow of $17.94 million), a book value of $0.23/share and absolutely no debt. That equates to a total debt-to-total-cash ratio of 0.00, which, in my opinion, is a good thing moving forward.

Recent Key Developments

January 28th: The company announced "that its Zerenex experimental kidney disease drug had met its late-stage trial goal of reducing phosphate levels in blood". As a result of meeting its late-stage trial goal Keryx also expects to submit a new drug application with the FDA and a marketing authorization application with the EMA for Zerenex in Q2.

January 29th: Keryx announced a secondary offering to the tune of $55 million. In reference to the secondary offering the company noted, "we intend to use the net proceeds from the sale of our common stock to fund pre-launch/launch inventory build-up and select pre-commercial/commercial activities related to Zerenex, and other general corporate purposes".

EntreMed, Inc.: Shares of EntreMed which closed Wednesday's trading session at $2.08/share currently possess a market cap of $46.81 million and have been given a TD/TC ratio of 0.00 which is based on the statistical calculations of my formula. The company's fundamentals include a total of $8.81 million in total cash on its books (it should be noted that the company currently has a negative operating cash flow of $2.39 million and a positive free cash flow of $2.59 million), a book value of $0.37/share and absolutely no debt. That equates to a total debt-to-total-cash ratio of 0.00, which, in my opinion, is a good thing especially for those looking to establish a long-term position in the company.

Recent Key Developments

January 23rd: EntreMed announced "that it has commenced a single-center Phase 2 study of its drug-candidate ENMD-2076, which is an orally-administered treatment for patients with advanced or metastatic soft tissue sarcoma. The primary objective of this Phase 2 study is to evaluate the safety and efficacy of ENMD-2076 in advanced/metastatic STS patients with the 6 month PFS rate being designated as the study's primary endpoint".

Oncolytics Biotech, Inc.: By the end of Wednesday's trading session, shares of Oncolytics ha closed at $3.60/share, possessed a market cap of $276.09 million, and had been given a TD/TC ratio of 0.00 which was based on the statistical calculations of my formula. The company's fundamentals include a total of $28.51 million in total cash on its books (it should be noted that the company currently has a negative operating cash flow of $35.39 million and a negative free cash flow of $20.47 million), a book value of $0.30/share and absolutely no debt. That equates to a total debt-to-total-cash ratio of 0.00, which, in my opinion, is a good thing for potential investors looking to establish a position in the next 12-24 months.

Recent Key Developments

In the past 60 days Oncolytics has announced two key developments with regard to its lead-drug candidate, Reolysin. Reolysin is currently the focal point of 31 separate clinical trials and is considered to be a cancer therapeutic for human patients previously diagnosed with various forms of cancer.

December 13th: Oncolytics said "that its Reolysin treatment, in combination with carboplatin and paclitaxel, performed well in a Phase III trial of patients with head and neck cancer. Of 105 patients, 86% exhibited tumor stabilization or shrinkage versus 67% in the control group. It should be noted that, the combo including Reolysin was also better at shrinking tumors than the two other treatments on their own".

January 28th: The company announced "the preliminary results from a Phase I study examining the intravenous administration of Reolysin in combination with Folfiri in patients with metastatic colorectal cancer, saying the combination was safe and well tolerated and resulted in disease control in the majority of valuable patients".

Final Analysis

For potential investors looking to establish a position in Keryx, EntreMed or Oncolytics, I'd take a closer look at each company and keep in mind the primary positive and negative catalysts moving forward. Given the fact that all three companies making considerable strides in terms of their respected lead-drug candidates and carry zero debt, I'd look to establish a small to medium position at current levels and add to that position once future developments are announced. I'd also continue to pay close attention to each company's debt levels, and any as ratio above 3.00 could warrant a position reduction.

Source: 3 Small-Cap Biotechs Possessing Zero Debt And Long-Term Potential