March 9, 2017
By Mark Terry, BioSpace.com Breaking News Staff
In general, the higher the price of a stock, the lower the risk, while lower-priced stocks are viewed as higher risk. Some of that might just come down to basic percentages—a drop in two dollars per share of a stock going for $100 is only 2 percent, while the same drop in a $5 stock is 40 percent drop. With the risk factor in mind, Maxx Chatsko, writing for The Motley Fool, takes a peek at three biotech stocks trading under $5 that have huge potential.
Based in Plymouth, Minn., BioAmber is focused on developing products using sugars instead of fossil fuels. It does so by genetically engineering yeast to produce bio-succinic acid out of agricultural sugars.
Chatsko notes that investors have lost interest in industrial biotech companies and their dismal track records, but BioAmber is worth a look. The company is focusing on a single production route, which has already moved out of research and development and into commercial scale-up in Sarnia, Ontario.
Chatsko writes, “Unlike its peers, BioAmber produces a drop-in chemical that’s in high demand in multiple industries. The company had no problem convincing chemical leader Mitsui to take a 40 percent ownership stake at Sarnia and purchase a significant amount of its production, which will eventually hit 30,000 metric tons per year. In fact, a second facility is being planned that will produce 200,000 metric tons per year of bioo-succinic acid—much of it converted to two other bulk chemicals—sold entirely to Vinmar.”
BioAmber is currently trading for $3.36.
Headquartered in Redwood City, Calif., Codexis (CDX)Codexis provides enzyme optimization services and develops biocatalyst products. These are used in the development of the manufacturing processes for active pharmaceutical ingredients (APIs), fine chemicals, agrochemicals, food ingredients, detergents and biofuels.
On January 6, Codexis announced that it is offering high-performance enzymes to clients using next generation sequencing (NGS) and polymerase chain reaction (PCR/qPCR) for in vitro molecular diagnostic applications. Its first product for that market targets improved library preparation for NGS users and expects to be in beta-test format in the second quarter of this year.
Codexis has similarities to BioAmber. It started out turning biomass into sugars that could then be turned into “cheap transportation fuels or a variety of renewable chemicals,” according to Chatsko. When oil prices were high, over $100 per barrel, that was economical, but it’s struggled when oil prices dropped, which partly explains the shift toward drug manufacturing.
Chatsko writes, “Today, Codexis boasts 15 of the top 20 pharmaceutical companies as customers. That’s good news considering biocatalysts for pharmaceutical manufacturing is estimated to be a $1 billion market opportunity. In addition to leading the largely untapped industry, the company has lucrative supply deals in food manufacturing and diagnostics.”
Codex is currently trading for $4.20.
Based in New York City, Keryx Biopharmaceuticals focuses on developing and marketing therapeutics for renal disease. Its first and only drug, Auryxia (ferric citrate) was approved by the U.S. Food and Drug Administration (FDA) in late 2014.
The drug didn’t take off like analysts expected. The company thought peak sales would hit up to $1 billion, but in 2016 only created net product sales of $27.2 million. The weak launch was made worse by manufacturing problems requiring Keryx to find a new production partner.
Chatsko writes, “This creates an interesting dilemma for investors. If Keryx Biopharmaceuticals really does have a blockbuster on its hands, then 2017 will be the year to start proving it. Manufacturing issues are now behind the company, although prescription growth is still in the process of recovering from previous supply problems. Of course, reaching the $1 billion sales mark was always dependent on obtaining additional approvals from regulatory agencies in the United States and Europe.”
The biggest problem facing Keryx is that it’s a unicorn—a single-product company. Everything relies on Auryxia and it doesn’t have anything else in its pipeline.
Keryx is currently trading for $5.41.
