November 21st, 2022 | 12:11 CET
Biotech - Hotter than ever: Catalyst Pharmaceuticals, BioNxt Solutions, Bayer
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At home in Southern Germany, the passionate stock exchange expert has been accompanying the capital markets for about twenty years. With a soft spot for smaller companies, he is constantly on the lookout for exciting investment stories.
Catalyst Pharmaceuticals: Super key figures thanks to niche product
The share of Catalyst Pharmaceuticals is considered a beacon of hope in the United States. The value has almost quadrupled since spring 2022 alone. But what does the biotech actually do? Catalyst stands for a drug called Firdapse, used to treat Lambert-Eaton syndrome. In this case, the transmission of impulses between the nerve and the muscle is disturbed. A side effect is that patients develop cancer more frequently than others. In the third quarter, sales of Firdapse climbed by almost 60% YOY in the US. Catalyst Pharmaceuticals' profit margin of 39.7% is very high and could rise further. Market observers believe that Firdapse has yet to reach its potential. The reason: Lambert-Eaton syndrome is so rare that Catalyst believes that most patients are not properly diagnosed. Even of the 1,600 patients in the US diagnosed, only about 800 are using the drug, which was approved in 2018.
The Company sees potential in Canada, where Firdapse has only been approved since 2020. Furthermore, Catalyst Pharmaceuticals is planning approval in Japan. Contrary to the image of biotechs as pure growth stocks, Catalyst Pharmaceuticals offers robust free cash flow of around USD 75 million over the past 12 months (fiscal year-to-date). Cash reserves are more than USD 250 million, and debt is only USD 4 million. If the Company succeeds in making its drug available to even more patients worldwide, organic growth potential will emerge. But the opportunities will likely be even greater if Catalyst uses its expertise to tackle new projects. Financing for these projects already seems to be secured. The stock appears exciting despite recent gains. Investors should remember that Catalyst Pharmaceuticals is already a billion-dollar company.
BioNxt Solutions: Two solutions before market maturity
The path to becoming a billion-dollar company is one we would like to see BioNxt Solutions take. The Canadian biotech company has several subsidiaries in Germany and was trading under the name XPhyto just a few weeks ago. The name change makes sense from the point of view of long-time company observers, as BioNxt has recently made important steps towards market maturity. On the one hand, it succeeded in developing its own version of a rotigotine patch that barely differs from the original in terms of efficacy. Rotigotine is a drug for Parkinson's disease applied with a patch that continuously delivers the active ingredient. In order to be ready for the market, a clinical trial with patients is still pending, but this could be completed in less than 12 months from the start. BioNxt says it is already exploring collaborations with potential partners - the market for rotigotine patches was USD 518 million in 2021 and is expected to grow to USD 760 million by 2030.
BioNxt could enter the market even faster with a product from the Company's diagnostics division. Diagnostics division includes several oral health-related products, including tests to detect stomatitis, periodontitis and peri-implantitis. Oral disorders include sequelae of medications used to treat addiction, prescribed by millions in the United States. Estimates suggest that between 6.7 and 7.6 million people in the US suffered from opioid use disorder in 2019. However, medication for this exact consumption disorder is hitting dental health, according to the latest findings from US authorities. BioNxt has inexpensive and easy-to-use tests to detect or rule out risks. BioNxt has already signed a memorandum of understanding with a US company for manufacturing, distribution and research and development. The Company does not want to be named yet, but is said to have been in the industry for 50 years and has its own FDA-standard manufacturing capabilities. BioNxt's stock has stabilized cautiously over the past few weeks. The market still needs to trust the new developments. However, if only one of the plans outlined above comes to fruition, the stock will likely face a revaluation. Moreover, the BioNxt business field of psychoactive substances, in which the Company has been active for some time, has not been taken into account at all.
Bayer: Successes in the past, returns in the future?
One company that stands for groundbreaking innovations that have revolutionized our everyday lives is Bayer. The only catch is that these groundbreaking innovations all happened several years ago. The best example from Bayer's product range is Aspirin, but heroin was also originally developed on the Rhine. Today, Bayer offers products related to cell and gene therapy and antibody-drug conjugates and focuses on personalized medicine. But although Bayer makes just over 40% of its sales from drugs, the Company is more of a seed producer, with 45% of sales. In addition, the drug division includes many established products and Bayer, a billion-dollar company, is very little dependent on innovative projects. Conversely, Bayer must therefore be considered an extremely solid stock. The business units are humming, and the balance sheet is also stable, thanks to high provisions. A dividend yield of 3.5% is on top of that.
Companies that deal with our health can also make a good contribution to asset accumulation. While Bayer is more of a solid yield generator to sleep soundly, Catalyst Pharmaceuticals has impressively demonstrated how to create tremendous growth in a niche market, even as a smaller company, and build a foundation for further biotech projects. It could be a similar story for BioNxt Solutions. The Company has a letter of intent with a US partner and could rake in millions there with the consequences of the opioid epidemic. Research results around its rotigotine patch for Parkinson's have also been encouraging and, in a best-case scenario, could bear fruit from 2024. With a market cap of less than CAD 50 million, BioNxt still has room to run.
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