Biotech stocks are unique.
They don’t really follow the rules of other stocks. Earnings don’t matter much. Media coverage doesn’t matter much. Current valuation multiples don’t matter much. Interest rates don’t matter much.
Instead, what matters to a biotech stock is very specific and rather formulaic.
A winning biotech stock needs to have five things:
- An innovative technology platform. Most biotech stocks that turned into big winners are built on an innovative technology platform, or platforms, that enables them to cost-effectively make new drugs.
- A robust drug development pipeline. A biotech company is only as good as the drugs in its development pipeline. If that pipeline is full of promising drugs that are deep into clinical trials and which are attacking promising markets, then you’re looking at a strong biotech stock.
- An experienced management team. Good people develop good drugs. It’s that simple. An experienced management team attracts good people, who build good drugs. An inexperienced management team doesn’t. Align yourself with the strong management teams in this space.
- A well-capitalized balance sheet. Almost all biotech companies burn cash, and will continue to burn cash until their products come to market, which may not be for several years. In order to alleviate liquidity risks, the best biotech stocks almost always have a strong balance sheet that can weather cash burn for several years.
- Some love from Wall Street. Some of the drugs that biotech companies are developing are quite complex. The science behind them is tough to understand at a granular level. But Wall Street analysts tasked with covering these companies know the science about as well as anyone – and if they believe in it, that’s a huge vote of confidence from a highly credible source.
If a biotech stock checks off all five of those boxes, then it may be worth taking a position in that biotech stock.
Unfortunately, not many biotech stocks do check off all five of those boxes.
But we’ve found one that has…
Today, we will tell you about one tiny, exciting biotech stock which we discovered and which is supported by multiple innovative technology platforms, has a very robust drug pipeline, is led by an experienced management team, has sufficient cash on its balance sheet, and is adored by Wall Street analysts. We think this tiny stock could end up being one of the market’s biggest winners over the next six months… and that’s not something we are saying lightly.
Could This Be the Biotech Industry’s Biggest Winner Over the Next Six Months?
We think a tiny, $230 million biopharmaceutical company by the name of Cerecor (NASDAQ:CERC) may end up being the industry’s biggest winner on Wall Street over the next six months.
Cerecor is advancing a clinical-stage pipeline of innovative therapies that address unmet patient needs within rare and orphan diseases. The company presently checks off all the boxes of a winning biotech stock.
Innovative technology platform? Check. Cerecor has pioneered six novel mechanisms of action, each of which are showing promising potential. The most promising of these is the company’s proprietary anti-LIGHT monoclonal antibody treatment, which is the only-known clinical stage anti-LIGHT antibody treatment in the market today and which has proven biomarkers.
Robust pipeline? Check. On top of its novel mechanisms, Cerecor has developed eight novel therapies, all of which are in clinical development programs. Three of them are in Phase 2 trials. One of those three in Phase 2 trials is an anti-LIGHT treatment for Covid-19 ARDS, and which has been shown to decrease the mortality rate of Covid-19 ARDS patients by ~50%.
Experienced management team? Check. The Chairman is the Chairman over at Teva, and was the former CEO at Celgene. The Chief Scientific Officer was a former exec at Johnson & Johnson. The CTO is a J&J alum, too. The Chief Medical Officer comes from GlaxoSmithKline. This is a pretty impressive confluence of talent for a tiny biotech company.
Strong balance sheet? Check. There’s about $44 million in cash on the balance sheet today. Cash burn has averaged about $10 million over the past several years. This gives the company some breathing room until expected commercialization in 2023.
Wall Street love? Check. Three analysts cover the stock. One has a $4 price target. One has a $7 price target. The last has a $9 price target. They all see the stock moving higher… a lot higher.
OK… so Cerecor has all the right ingredients… but what’s going to spark the big breakout in Cerecor stock?
Well, over the next six months, the company is set to report a deluge of data from its robust pipeline. Essentially, all eight of its drugs are due to release some sort of meaningful data between now and the end of the year.
Even if just a handful of those data releases are positive, Cerecor stock could soar…
And that’s why Cerecor stock deserves to be on your buy radar today.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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