The small cap biotech space has come under tremendous pressure this year after having an excellent run over the last few years. While there have been questions about a potential bubble in the whole biotech sector, small cap biotech stocks have especially come under scrutiny for the valuation they have commanded over the last few years.
Having said that, there are still some interesting undervalued plays in the small cap biotech space.
Actinium Pharmaceuticals (NYSEMKT: ATNM)
Based in New York City, Actinium Pharmaceuticals (NYSEMKT: ATNM) is a biopharmaceutical company focusing on the development of therapies for diseases using its alpha particle immunotherapy (APIT) platform and other related technologies.
ATNM’s pipeline includes Iomab-B, which is currently being developed for Hematopoietic Stem Cell Transplantation (HSCT). Actimab-A is another product in the company’s pipeline. The company has already conducted a Phase I dose escalation trial in collaboration with Memorial Sloan Kettering Cancer Center (MSKCC) to evaluate the safety, pharmacology, and biological activity of Actimab-A in Acute Myeloid Leukemia (AML).
Following clearance from the FDA, the company initiated Phase I/II multi-center AML trial with fractionated doses of Actimab-A.
In October, ATNM announced that enrollment in the fourth and final cohort in the Phase I portion of the ongoing Phase I/II trial of Actimab-A has been completed. In late October, the company also announced that data from the Phase I portion of its Phase 1/2 clinical trial for Actimab-A has been selected by the American Society of Hematology (ASH) Program Committee for poster presentation at the 57th Annual Meeting in Orlando, Florida on December 7, 2015. This is a major upcoming catalyst for ATNM and could provide a boost to the stock price.
On Wednesday, the company made another major announcement. Actinium announced the submission of its Investigational New Drug (IND) application with the FDA for Iomab-B. One the IND is accepted, ATNM will commence a single, pivotal Phase III clinical study in refractory and relapsed AML patients over the age of 65.
Commenting on this important development, Kaushik J. Dave, Ph.D., MBA, CEO at Actinium said that the company is excited to have submitted the Iomab-B IND application to the FDA. Dave said that the company focused heavily on Iomab-B in 2015 and overcame its previous manufacturing hurdles, which gave the company great confidence when it met with the FDA for its pre-IND meeting.
The submission of Iomab-B IND application is significant as it is the near-term commercial opportunity for ATNM. Actinium believes that the addressable market for its Iomab-B in AML is $750 million. That is nearly 8 times ATNM’s current market capitalization.
ATNM has several upcoming catalysts. The nearest catalyst is the ASH conference next month where the company will present data from the Phase I portion of its Phase 1/2 clinical trial for Actimab-A. The next catalyst will be in early 2016 when the company initiates the Phase II trial for Actimab-A. Another catalyst in 2016 will be the initiation of the pivotal Phase III trial for Iomab-B. Given all this upcoming catalysts, ATNM shares are expected to remain in focus over the next few months.
ATNM is already strengthening its management team as it prepares for the Phase II and Phase III trials. Earlier this month, the company announced the appointment of Dr. Xin Du, Ph.D., to the position of Executive Director, Regulatory Affairs and Dr. Sri Srivastava, Ph.D., PMP to the position of Associate Director of Project Management.
Given all the upcoming catalysts and the potential of ATNM’s pipeline, it is not surprising to see that analysts are currently very bullish on the stock. The three brokerage firms that currently cover ATNM have “buy” rating on the stock. The consensus price target on ATNM is $14.67, which represents an upside of more than 600% from current levels.
Not surprisingly then, several institutions have bought ATNM shares. The top institutional holders include Vanguard Group Inc., BlackRock Institutional Trust Company NA, Millennium Management LLC, Bridgeway Capital Management and Goldman Sachs Group Inc.
Arrowhead Research Corp. (NASDAQ: ARWR)
Another interesting player in the small cap biotech space is Arrowhead Research Corp. Although the stock has had a disappointing performance so far this year, the company’s lead product candidate has tremendous potential.
ARWR’s lead product candidate is ARC-520 for the treatment of chronic Hepatitis B. Hepatitis B treatment market is significantly bigger than the estimated $15 billion Hepatitis C market. More importantly, there are currently no treatment options for chronic Hepatitis B. While several companies are currently in the race, ARWR’s ARC-520 is one of the most promising products. In September, the company had announced data from multiple studies that showed ARC-520 could potentially lead to functional cure in Hepatitis B.
Despite the lead product candidate’s potential, ARWR shares have very high short interest. But given so many upcoming catalysts, it would not be surprising to see a rally in ARWR.
Galmed Pharmaceuticals Ltd. (NASDAQ: GLMD)
Another very interesting player in the small cap biotech space that looks significantly undervalued is Galmed Pharmaceuticals Ltd. Based in Israel, Galmed’s lead product candidate is being developed for the treatment of NASH, a disease that has significant unmet need. According to estimates from Deutsche Bank, the NASH treatment market could be worth around$40 billion. As with Hepatitis B several players are competing in the NASH space. GLMD’s lead product candidate Aramchol has shown promise but unlike several other players in the NASH space, the company’s shares look undervalued.