- Today, we circle back on OncoCyte for the first time in over a year.
- This small cancer diagnostic firm is in the early stages of its commercialization efforts and just made a small, strategic "bolt-on" acquisition.
- We update our investment theme on OncoCyte in the paragraphs that follow.
- I do much more than just articles at The Insiders Forum: Members get access to model portfolios, regular updates, a chat room, and more. Get started today »
The company has seen some positive analyst action on its shares so far in 2021 and posted some minor news this morning. Given that, it seems a good time to circle back on Oncocyte and update its investment case. A full analysis follows below.
OncoCyte is a small diagnostic concern based in Southern California. The company is focused on the development and commercialization of proprietary laboratory-developed tests for the detection of cancer. The shares currently trade right at $4.00 a share and sport an approximate market capitalization of $400 million.
The company aims to be a leader in early detection cancer tests. The company just launched DetermaRx in mid-2020 after garnering approval. OncoCyte received their final pricing from CMS in the third quarter, allowing the company to bill and collect Medicare revenues.
DetermaRx is a treatment stratification test to identify patients with stage I and IIA non-squamous NSCLC who may benefit from adjuvant chemotherapy. Rollout was just happening in the third quarter and the company only posted $600,000 worth of revenues during the quarter.
The company also is finalizing development of DetermaIO which should hit the market soon. This product is described on the company's website as "a 27-target multivariate gene expression test performed on FFPE biopsy specimens that measures the presence of subtypes of infiltrating inflammatory cells, and the presence or absence of a differentiated stromal microenvironment."
On Feb. 2, the company announced a very small acquisition of privately held Chronix Biomedical. This is a company OncoCyte already had a collaboration deal around to develop Chronix’s TheraSure-CNI Monitor, a patented, blood-based test for immune therapy monitoring. The purchase obviously supersedes the previous agreement that was just put in place in October of last year.
Analyst Commentary and Balance Sheet:
The company gets sparse coverage from the analyst community. Over the past six months, only three analyst firms have weighed in on Oncocyte. On Nov. 9, Keyback initiated the shares with a new Overweight and $5 price target. More recently on Jan. 26 maintained their Buy rating and bumped their price target on OCX up three bucks a share to $8. Finally, on Feb. 10 Piper Sandler also boosted its price target on the stock three dollars a share to $7 while maintaining its own Buy rating on the stock.
After a net loss of $6.8 million in the third quarter, the company had $10.7 million of cash and marketable securities on hand as of Sept. 30, 2020. On Jan. 20, the company raised $25 million via a registered offering. After it acquisition of Chronix, the company executed a $35 million secondary offering at $4.50 per share in early February. A beneficial owner purchased $2.7 million worth of new shares in that offering, which was the first insider purchase in the stock since late 2019.
The company has made some solid progress since we last looked at this name. It has launched DetermaRx with DetermaIOTM soon to follow. It also just made its second small acquisition in recent years and has also products in its pipeline (above).
Investors should get a better picture of the company's progress on all fronts when it announces fourth quarter earnings soon followed by a conference call with analysts. The stock is up approximately 60% since we last revisited it. While it's way too early in OncoCyte's commercialization efforts to have confidence to take a significant stake in the stock, the shares still seem to have merit as a small "watch item" position pending further progress at the company.
Bret Jensen is the Founder of and authors articles for the Biotech Forum, Busted IPO Forum, and Insiders Forum
Author's note: I present an update my best small and mid-cap stock ideas that insiders are buying only to subscribers of my exclusive marketplace, The Insiders Forum. Our model portfolio has nearly doubled the return of its benchmark, the Russell 2000, since its launch. To join our community and gain access to our market beating returns, just click on our logo below.
This article was written by
Analyst’s Disclosure: I am/we are long OCX. 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.
I have small 'watch item' position in OCX.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.