This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Biotech Stock Mailbag: AcelRx, Yellen Aftermath, Nymox

For perspective, here's a chart of the IBB and XBI performance year to date. It's too early to say anything conclusive, of course, but it does look like Yellen may have cut short the biotech recovery from the May low.
IBB Chart
IBB data by YCharts

As you might expect, biotech Twitter and my inbox quickly filled with indignation over Yellen's criticism of biotech stock valuations. This email from Randall W. was pretty typical:

Yellen's comment about biotech stock valuations was entirely inappropriate for a Fed chair to make. She should not be calling out individual sectors for criticism. What does she know about biotech stocks, anyway? Nothing.

A lot of people, including Jim Cramer, agree with Randall. I'm agnostic about the appropriateness of Yellen's comments, although I am fairly certain people wouldn't be angry had Yellen called biotech stocks under-valued. No one ever gets in trouble for telling people to buy biotech stocks, even when (some) valuations reach ridiculous levels. 

Is Yellen right about small-cap biotech stock valuations being stretched? Valuations are subjective, by definition, and Yellen didn't offer any supportive evidence. There is no definitive answer, although I'll give it a try. I ran a screen using S&P CapitalIQ to see how many small-cap biotech stocks hit all-time highs in 2014. Admittedly, an all-time high stock price doesn't necessarily tell you whether a stock is over-valued, but it's the best proxy I could come up with given the tools at my disposal. 

The screen identified 291 biotech and drugs stocks with market capitalizations of $1 billion or under. Those of us who follow biotech stock obsessivelys might quibble with using $1 billion as a small-cap ceiling but it's a common line of demarcation for the broader investment community. All the stocks identified also trade on a major U.S. exchange. 

Of these 291 small-cap biotech and drug stocks, 101, or 35%, hit all-time high stock prices in 2014, according to CapitalIQ. I can't place this 35% in historical perspective, but seems suggestive of excessive valuation. I wouldn't make a blanket statement that all small-cap biotech stocks are over-valued. Enanta Pharmaceuticals (ENTA - Get Report) hit an all-time high stock price this year, but I'd say that's justified given the potential for its hepatitis C drugs in partnership with Abbvie. Bluebird Bio (BLUE) and Hyperion Therapeutics (HPTX) are also on the list, and probably deservedly so. 

But also on the 2014 all-time high list are Neuralstem (CUR), NewLink Genetics (NLNK) and Ohr Pharmaceuticals (OHRP). I'd say none of these stocks deserve the valuation bump they've received this year. NewLink, in particular, was grossly over-valued earlier this year based on some reckless sell-side research pumps

Just one guy's thoughts using imperfect data. We can all agree that small-cap biotech stocks are volatile. I checked to see how many of the 291 small-cap stocks in my screen hit all-time lows in 2014. The answer: 82, or 28%. 

John B. writes:

Nymox Pharmaceuticals (NYMX) has a market cap of approximately $163 million and has had very good results to date on its NX-1207 drug for benign prostastic hyperplasia (BPH). The company just completed a phase III study of NX-1207 with no results released yet. Nymox completed a small phase II study using this drug at a higher dose for low-grade prostate cancer with good results showing lower Gleason and PSA scores. An Italian pharmaceutical company, Recordati, bought European rights to NX-1207 and undoubtedly did extensive due diligence. In an efficient market, why isn't Nymox's market cap higher in your opinion?

I'd argue the market is efficient with respect to Nymox because investors have very little confidence in NX-1207, rightfully so. I stopped covering Nymox in early 2011 after a very strange interview with CEO Paul Averback during which he refused to tell me basic information about NX-1027. At that time, the two phase III studies of NX-1207 in BPH were underway. Averback refused to provide any guidance at all on when the studies would fully enroll their planned 1,000 patients, or when results would be announced, but he did say Nymox intended to seek FDA approval in 2012 (assuming positive trial results.)

Three years after my chat with Averback and two years after his approval filing guidance went past due, Nymox still hasn't disclosed results from the two phase III studies of NX-1207. The company did say study No. NX02-0017 completed patient enrollment in November 2012. Patients are treated for one year, which means last patient in completed treatment in November 2013. Eight months is a long time for wait for results. The listing status for the 0017 study on was changed to "completed" on April 29, yet still no word on the results from Nymox. 

The second, phase III study, dubbed NX02-0018, completed patient enrollment in May 2013, according to Nymox. This suggests last patient in finished treatment two months ago. 

Perhaps Nymox wants to announce results of both studies simultaneously. Still, why the long delay from previous guidance? Why is taking so long to conduct two studies in BPH patients? These studies started enrolling in 2009-2010. 

Too many questions, too few answers, hence the market's disdain for Nymox. 

Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.
2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
ACRX $3.49 0.00%
ENTA $26.70 0.00%
NYMX $2.15 0.00%
OHRP $2.96 0.00%
XBI $47.05 0.00%


Chart of I:DJI
DOW 15,973.84 +313.66 2.00%
S&P 500 1,864.78 +35.70 1.95%
NASDAQ 4,337.5120 +70.6750 1.66%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs