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BDSI: A Biotech Research Firm With Good Growth Prospects

|Includes: BioDelivery Sciences International, Inc. (BDSI)

Biodelivery Sciences International (NASDAQ: BDSI) is biotech research company specializing in pain management and addiction. They currently have one drug on the market and another two which will have completed clinical trials by the end of 2012 and could have FDA approval as soon as fourth quarter 2013. Two other headliner formulations are currently in the early stages of development. The company markets their products through third parties on a worldwide basis.

Regarding financials, BDSI has very little long-term debt and boasts strong Return-on-Assets and Return-on-Equity scores of 34.9% and 83.7%, respectively. Profit margin(16.8%) and operating margin(39.2%) are almost double the industry average, which puts BDSI in the top 10% of the Pharmaceutical Sector for these metrics.

I have some caution regarding the Quick Ratio (1.6). This is a good score, but it is the lowest of all the stocks on my radar right now. Because the debt is mostly short-term, this is a stock that needs to be watched closely if I add it to our portfolio. Negative news could affect the availability of financing and throw the company's capital structure into disarray.

Based on research reports from GMIAnalyst, the risk of material restatements to financial statements is about 1%, which is an average risk. BDSI's Governance is solid, with no potential issues flagged. Accounting risks are pretty standard stuff for a small-cap biotech and are focused on sales expenses and valuation of patents.

As of this writing, the technicals for BDSI are not favorable for immediate investment. Parabolic SAR and Stochastic measures point to a short term pullback and the shares are retreating from a resistance point at $5.66. A buying opportunity may exist at the support level of $4.81 but I intend to hold off the trigger until stochastics and PSAR confirm a reversal.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: The content of this publication is for information and education purposes only. It is based solely on publically available information. I make no assumptions about my readers' risk tolerance, so I suggest consulting with a qualified advisor before investing