Plenty of companies out there are now developing treatments against the coronavirus pandemic. BioCryst Pharmaceuticals (BCRX -0.13%) is one of many small-cap biotech companies developing a COVID-19 drug of its own that's currently in early stage clinical testing.
While most companies working on a COVID-19 treatment have seen their shares jump, BioCryst has been a surprising underperformer so far this year. Its stock is up 19.7% since the start of the year, slightly ahead of the Nasdaq's 18.1% gain during the same period. In comparison to some of the other hot coronavirus stocks on the market, however, this performance really isn't that great.
What does this mean for investors? Is BioCryst a potential diamond in the rough, or is the company really just not that remarkable after all? Let's see what else this company has to offer, and whether it deserves a spot in your portfolio.
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What BioCryst brings to the table
There are different types of treatments targeting COVID-19, with some of the most popular being vaccines. Gilead's remdesivir was one of the very first antiviral treatments to be tested on COVID-19 patients earlier this year.
BioCryst is working on its own antiviral drug, galidesivir, which has shown positive results in its early phase 1 trial and has now begun a phase 2 trial in Brazil. Just like remdesivir, which was originally designed to treat Ebola, galidesivir was originally created to treat the Marburg virus, but has shown promise in treating other types of viruses as well.
At this point, only time will tell how galidesivir fares. Even if the drug ends up receiving regulatory approval, it will still have to compete with the many other COVID-19 treatments in development.
Promising non-COVID treatments
While it's easy to get focused on COVID-19 treatments, BioCryst has arguably a much more impressive lineup of non-COVID related drugs. One such product is already on the market, even if it's not generating much cash for BioCryst at the moment.
Rapivab is an influenza treatment developed by BioCryst that received Food and Drug Administration (FDA) approval in 2014. Since then, some of the biggest buyers of the drug have been federal health authorities. The Centers for Disease Control bought $13.9 million worth of Rapivab in the fourth quarter of 2019 as part of a procurement contract with BioCryst.
As for BioCryst's upcoming pipeline, there's quite a bit of anticipation surrounding berotralstat, which has finished its phase 3 trials and is currently awaiting regulatory approval. Berotralstat treats a rare type of swelling called hereditary angioedema, which affects around one in 50,000 people. These severe swelling attacks tend to affect the arms and legs but can also irritate the intestinal tract and the airways in the lungs.
BioCryst expects peak sales of around $500 million for berotralstat, which is a pretty big deal for a small-cap company whose market valuation is around $700 million. The FDA is expected to make a decision on berotralstat by Dec. 3 of this year.
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Looking at the financials
As to be expected for a small-cap biotech company, BioCryst has very little in the way of revenue. The company saw just $4.8 million in income for its first quarter, with most of that figure coming from various R&D and royalty revenue agreements. Considering that total expenses for the quarter came in at $45.8 million, it's not surprising that BioCryst's net losses were a whopping $37.6 million.
All of this is par for the course for early stage biotech companies. Perhaps the bigger problem for BioCryst, however, is its relatively meager cash reserves. With $113.1 million in cash and cash equivalents on its balance sheet, that's a little more than three-quarters worth of financial breathing room before the company needs to look elsewhere for additional financing.
Is BioCryst a Buy?
While BioCryst has received a lot of attention as a potential player in the COVID-19 treatment market, there's a stronger case to be made for the company's other treatments.
BioCryst already has one drug that's received regulatory approval, proof that the company can successfully develop drug candidates to completion. While its first drug hasn't been a financial home run, there's a lot of potential surrounding its second major drug, berotralstat. If it ends up receiving regulatory approval later this year, berotralstat could be a major financial win.
Until that happens, however, there's still a lot of uncertainty surrounding this company. If you're comfortable with taking a high-risk, high-reward investment approach, buying a small number of shares could be a good idea right now. Just make sure to keep your initial position relatively small for the time being.
