As the market attempted to recover from a recent series of disappointing performances, biotechnology firm Baudax Bio (NASDAQ:BXRX) represented a dramatic winner. Earlier Thursday morning, management disclosed that the U.S. Food and Drug Administration (FDA) granted its lead clinical candidate orphan drug designation. Though encouraging, BXRX stock still has a wall of worry to climb.
According to the accompanying press release, the FDA granted the orphan drug status to the drug candidate TI-168 for the treatment of Hemophilia A with inhibitors. This therapeutic represents Baudax’s next-generation, FVIII-specific T-cell receptor therapy utilizing human regulatory T cells (Tregs). FVIII refers to the protein that is deficient or defective in patients with classical hemophilia.
Per the statement, the FDA’s Office of Orphan Products Development grants orphan status for drugs designed for conditions affecting fewer than 200,000 people in the U.S. Fundamentally, the designation provides several advantages to drug developers, including the potential for market exclusivity for seven years following FDA approval.
In addition, orphan drugs feature financial benefits such as tax credits for qualifying clinical trials and reduced annual product feels. Therefore, it’s a huge moment for the biotech, explaining the massive leap in BXRX stock. Still, it’s just one part of the puzzle.
BXRX Stock Faces a Credibility Crisis
Another key highlight regarding the aforementioned press release is the FDA clearance for Baudax’s investigational new drug (IND) application. As a result of the clearance, management believes it can activate the Phase 1/2a clinical trial of TI-168 for the treatment of hemophilia A with inhibitors with a modest initial budget. As well, it opens the door to advance the therapy to further clinical investigation in early 2024.
While BXRX stock managed to almost double for the day, it’s also important to consider the broader context. First, at a price of roughly 53 cents at time of writing, prospective investors would be absorbing a significant risk. As well, the 52-week range for shares goes from 30 cents to $12.24. In the trailing one-year period, Baudax lost almost 95% of market value.
Another glaring headwind moving against BXRX stock is the poor financials. According to investment data aggregator Gurufocus, Baudax prints a cash-to-debt ratio of 0.16x, worse than 92.43% of the biotech industry. In addition, the Altman Z-Score of -121.46 symbolizes an enterprise in deep distress.
Why It Matters
According to TipRanks, only one analyst from Noble Financial covers BXRX stock, with an unconvincing no-price “hold” rating. However, it’s also fair to point out that all of the insider transactions for Baudax represent purchases, with the last buy coming in December 2022.
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On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
