Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Two Small Bio Stocks Ready To Blast: Labopharm Inc. (NASDAQ:DDSS), Spherix Inc. (NASDAQ:SPEX)

|Includes:Endo International plc (ENDP), SPEX

As I look over the destruction in the small cap biotech arena recently, I cannot help but come to the conclusion that these two small cap biotech stocks are undervalued.  Both stocks are way off their highs when great drug news was recently revealed.  Each has pulled back by close to, if not more than 50% from those highs.

Labopharm Inc. (NASDAQ:DDSS) is the first I wish to highlight. This stock had great news about a week ago when they got FDA approval for their drug OLEPTRO.  This drug is an extended release tablet, once-daily formulation of the antidepressant Trazodone.  This drug may revolutionize the antidepresent drug market.  When the FDA granted Labopharm approval for OLEPTRO, the stock traded close to $3.50 pre market. It opened the day at $2.99 and fell like a rock.  This was a classic, sell the news type event.  Since then, shorts have piled on board and pushed it to a low two days ago of $1.80.  Since then it has rebounded back to just over $2.00.  It is very possible to see this stock trade back over $3.00 in the near term on any deals.  The key is whether or not they will have to dilute the companies shares to raise capital and how they execute the selling of the drug.  I am giving Labopharm a major positive bias at anything under $2.00 with a general trade max to $2.50 - $3.00 short term.

The other company that looks extremely promising is Spherix Incorporated (NASDAQ:SPEX) a small cap biotech with a promising drug on the horizon.  Naturlose is the drug used to treat type 2 diabetes.  The key revolves around the drug being a natural substance.  Just days ago the company released positive interim results in the phase 3 trial.  The interim trial showed major reductions in variability of HbA1c levels.  As the phase 3 trial winds down, begin to watch this tiny 17 million market cap company inch higher in my opinion.  This drug could be a major player in the future.  Spherix Inc. will most likely search out a partner and that alone could be the driver of a major move back over $2.00.  I am issuing a major positive bias on Spherix Inc. with a possible move over $2.00 in the short term.

Both these companies show themselves to be on the verge of the big time.  Whether they get bought out, try and make it on their own or partner up, they have the potential to truly become a monster among small fish.

Gareth Soloway
Chief Market Strategist

Stocks: ENDP, SPEX