2 Small-Cap Biotech Companies With Zero Debt And At Least $10 Million In Cash

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 |  Includes: CTIC, GALT
by: Matt Schilling

When it comes to small-cap biotech stocks most eyes are always focused on clinical trials and drug developments, but what about their fundamentals? In this article, I wanted to take a closer look at two small-cap biotech companies which carry absolutely no debt, trade under $5.00/share and have at least $10 million in cash on their books.

For this analysis, the companies needed to meet the following criteria:

  • Currently have TD/TC and TD/R ratios of no more than 0.00.
  • Currently trade under $5.00/share
  • Currently have a market cap under $100 million
  • Currently have at least $10 million in cash on their books

After developing this screen, I found two small-cap biotech companies that currently carry total debt-to-total-cash (TD/TC) ratios and total-debt-to-revenue (TD/R) which are exactly at zero. When it comes to these types of ratios I consider any ratio under "1" very healthy, under "2" satisfactory, under "3" cautionary, and anything over "3" a warning sign. I've also chosen to include stocks that are currently trading under $5/share in an effort to bring to light some of the small-cap biotech companies which may not be on the radars of the larger institutional investors.

Company

Symbol

Price

Mkt Cap

Total Debt

Revenue

Total Cash (mrq)

TD/TC Ratio

TD/R Ratio

Cell Therapeutics

(NASDAQ:CTIC)

$1.44

$76.21 M

0.00

0.00

$14.29 M

0.00

0.00

Galectin Therapeutics

(NASDAQ:GALT)

$2.61

$41.03 M

0.00

0.00

$11.06 M

0.00

0.00

Click to enlarge

Cell Therapeutics: It should be noted that shares of Cell Therapeutics closed Thursday's trading session at $1.44/share, currently possess a market cap of $76.21 million and have been given TD/TC and TD/R ratios of 0.00 which are based on the statistical calculations of my formula. The company's fundamentals include a total of $14.29 in total cash on its books (it should be noted that the company currently has a negative operating cash flow of $51.42 million and a negative free cash flow of $51.66 million), a negative book value of -$0.17/share and absolutely no debt. In my opinion, the fact CTIC has both a TD/TC and TD/R ratio of 0.00 could be a good thing moving forward although I'm still concerned Cell Therapeutics has been unable to generate revenue.

Recent Key Developments

January 31st: On Thursday the company announced that the Gynecologic Oncology Group has informed it that an independent Data Safety Monitoring Board has recommended the continuation of Phase 3 clinical trials of Opaxio, a therapy for ovarian cancer, with no changes following a planned interim survival analysis.

Galectin Therapeutics: Shares of Galectin, which closed at $2.61/share on Thursday, currently possess a market cap of $41.03 million and have been given a TD/TC and TD/R ratio of 0.00 which is based on the statistical calculations of my formula. The company's fundamentals include a total of $11.06 million in total cash on its books (it should be noted that the company currently has a negative operating cash flow of $7.29 million and a negative free cash flow of $3.38 million), a book value of $0.15/share and absolutely no debt. In my opinion, the fact GALT has both a TD/TC and TD/R ratio of 0.00 could be a good thing moving forward although the fact the company has been unable to generate sustainable revenue concerns me.

Recent Key Developments

January 31st: The company announced on Thursday that it had submitted an Investigational New Drug application to the FDA to support a proposed indication of GR-MD-02 for treatment of non-alcoholic steatohepatitis with advanced fibrosis, or fatty liver disease.

Final Analysis

For potential investors looking to establish a position in either Cell Therapeutics or Galectin Therapeutics, I'd keep in mind the primary positive and negative catalysts and remain cautious, given the fact both companies have yet to generate revenue. When it comes to initial position size I'd look to establish a small-medium sized position at current levels and keep an eye out for improving fundamentals.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.