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As investors await the upcoming quarterly results from major biotech companies such as Merck (NYSE:MRK) (due out February 1st) I wanted to take a closer look at two small-cap biotech companies which carry absolutely no debt and trade under $6.00/share. For this analysis, the companies needed to meet the following criteria:

  • Currently have TD/TC ratio of 0.25 or less
  • Currently trade under $6.00/share
  • Currently have a market cap under $500 million

After developing this screen, I found two small-cap biotech companies that currently carry total debt-to-total-cash (TD/TC) ratios which are exactly at zero. 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

Total Debt

Total Cash (mrq)

TD/TC Ratio

Orexigen Therapeutics

(NASDAQ:OREX)

$5.67

$463.39 M

0.00

$108.28M

0.00

ImmunoCellular Therapeutics

(NYSEMKT:IMUC)

$2.00

$102.18 M

0.00

$10.01 M

0.00

Orexigen Therapeutics: It should be noted that shares of Orexigen closed Wednesday's trading session at $5.67/share, currently possess a market cap of $463.39 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 $108.28 million in total cash on its books (it should be noted that the company currently has a negative operating cash flow of $44.04 million and a negative free cash flow of $20.43 million), a book value of $0.70/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

December 18th: Orexigen announced "that it had completed the screening of new patients for its Light Study trial to evaluate its obesity drug Contrave. Roughly 9,000 patients will be randomized in the study within the next few weeks." The company also anticipates resubmitting an NDA to the FDA for Contrave as early as the second half of 2013 after conducting an interim analysis for the drug in first half of the year.

ImmunoCellular Therapeutics: Shares of ImmunoCellular, which closed at $2.00/share on Wednesday, currently possess a market cap of $102.18 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 $10.01 million in total cash on its books (it should be noted that the company currently has a negative operating cash flow of $10.97 million and a negative free cash flow of $6.30 million), a book value of $0.07/share and absolutely no debt. That equates to a total debt-to-total-cash ratio of 0.00, which, in my opinion, could be a positive catalyst over the next 12-24 months.

Recent Key Developments

January 29th: ImmunoCellular announced, "The FDA has allowed the investigational new drug (NYSE:IND) application for ICT-140, paving the way for conducting a clinical trial. ImmunoCellular filed the IND application with the FDA in the fourth quarter of 2012, as planned. The clinical trial of ICT-140 will be a Phase IIa open-label safety study, and is anticipated to enroll approximately 20 patients with ovarian cancer who have been previously treated with standard chemotherapeutic agents, in a number of clinical sites in the US. The company anticipates initiating the trial in the second half of 2013."

Final Analysis

For potential investors looking to establish a position in Orexigen or ImmunoCellular, I'd take a closer look at each company and keep in mind the primary positive and negative catalysts moving forward. Given the fact both companies have made 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 near-term catalysts demonstrate a positive outcome.

Source: 2 Small-Cap Biotechs With Zero Debt And Potentially Beneficial Long-Term Catalysts