Investing in microcap biotech stocks can be a smart way to increase your portfolio value. However, there are a few things you need to know before you make your investment decision.
Aerovate Therapeutics
Listed on the NYSE under the ticker symbol AVTE, Aerovate Therapeutics is a small cap biotech stock focusing on the development of drugs for rare cardiopulmonary diseases. In the space of two years, it has raised $121.5 million in an IPO, making it the 10th Massachusetts-based biotech to have done so in 2016.
Aerovate’s main focus is the AV-101, a dry powder inhaled formulation of imatinib for the treatment of pulmonary arterial hypertension (PAH), a disease that afflicts millions of Americans. The company is currently conducting a Phase 2b trial to determine the safety and efficacy of the drug. In the near future, it will file an IND for its lead drug, VRDN-001, an inhaled drug designed to increase the half-life of imatinib.
Aerovate also has a few other products on the horizon. The VRDN-002 is an experimental subcutaneous drug that has half-life extension technology. The company has also been active in a number of vaccine collaborations. These include collaborations with other companies to advance CpG 1018 adjuvant technology and a universal influenza vaccine, namely the COVID-19 vaccine.
Aerovate is no stranger to the spotlight, having been incubated by life sciences venture capital firm RA Capital Management. The company also has a number of institutional investors, including Baker Bros. Advisors Lp., Orbimed Advisors Llc., and Surveyor Capital. The newest member of the family is the Aerovate Group, a private equity fund which is actively participating in the company’s growth and development.
The company’s IPO was a major milestone, marking the company’s first time trading on the NYSE. Its largest shareholder is Sofinnova Investments, Inc., while a number of other investors, including Evercore Group LLC, Cowen and Co. LLC, and Surveyor Capital also took a piece of the pie.
Viridian Therapeutics
Viridian Therapeutics (NASDAQ: VTXA) is a microcap biotech stock that is advancing new treatments for serious diseases that are currently untreatable. Its lead program is a humanized monoclonal antibody, called VRDN-001, which targets the insulin-like growth factor-1 receptor (IGF-1).
In September, the company announced positive clinical data in a Phase 1/2 trial for VRDN-001. It also reported financial results for the third quarter ending September 30, 2022.
One of the company’s other programs is called MRG-229, which treats adult T-cell leukemia. It’s also working on a vaccine to treat plague and universal influenza. The company also has collaborations with Anthera Pharmaceuticals (NASDAQ:ANTHR), Arcadia Biosciences (NASDAQ:ABIO), Dynavax, Inc. (NASDAQ:DVAX), and Parkway Medical Limited (NASDAQ:PKWY).
A company is also required to have a robust pipeline, which Viridian Therapeutics does. Its pipeline addresses strategic gaps in therapeutic areas, including thyroid eye disease, and it’s built on a solid biology.
The most important part of this pipeline is the VRDN-001, a humanized monoclonal antibody that targets the IGF-1 receptor. The company reported positive clinical data for a dose of 10 mg/kg in November of 2022. It also plans to launch a Phase II study with a higher dose of VRDN-001.
Aside from the VRDN-001, Viridian’s pipeline also includes a subcutaneously administered low-volume version of the VRDN-001, called VRDN-002, and an extended-half-life version, called VRDN-003. The company plans to evaluate clinical data from these three programs, and select one for Phase 3 development beginning in early 2024.
While the biotechnology sector comes with risks, it also has the potential to pay off big time. Viridian Therapeutics is one of the top small cap biotech stocks to watch in 2022. Viridian plans to use the money from the underwritten public offering to fund clinical development programs, working capital, and general corporate purposes.
Dynavax
Developing immuno-oncology products is a major area of focus for Dynavax Microcap Biotech stocks. The company has been developing vaccines that target the Toll-like Receptor (TLR) family, key receptors of the innate immune system. TLRs have strong inflammatory responses, and are associated with many diseases.
Dynavax is also collaborating with several other companies to advance the CpG 1018 adjuvant, a new compound that is designed to boost the immune response to vaccines. This adjuvant is being tested in pertussis, shingles and plague.
The company is also testing the effects of vaccine adjuvants in patients with the rare autoimmune disease Lambert-Eaton myasthenic syndrome (LEM). The FDA has approved the use of the toll-like receptor 9 agonist adjuvant in HEPLISAV-B, a hepatitis B vaccine. This product is sold to prevent infection by all known subtypes of the hepatitis B virus in adults.
The company recently announced it will receive an additional $100 million in the second tranche of a $175 million non-dilutive term loan agreement. The company also said it has emergency authorization from a well-off Middle Eastern country for its partner’s coronavirus vaccine.
The company also has a pipeline of immuno-oncology products in Phase 1 development. It has a partner in India, Biological E. Limited, that is developing a coronavirus vaccine, which is closer to approval in Europe.
The company is also developing an agonist-based product to treat allergies. It has a product in Phase 2 studies, and it is in preparation to begin sales. The company has also announced that it will cut its workforce by 30%, which is an effort to save on costs.
The company’s financial position is strong. It has $192 million cash on its balance sheet as of the end of last year. It also has substantial institutional ownership. Among the largest shareholders are BlackRock Inc., Chicago Capital, LLC, State Street Corp. and Federated Hermes, Inc.
Wasatch Micro Cap Value
During the GFC, Micro-Cap stocks began to lag behind Large-Cap stocks. After the market recovered in 2009, Micro-Cap stocks have rallied with Small-Cap stocks. However, Micro-Cap stocks are least correlated to the total US equity market. In fact, Micro-Cap stocks have given the best returns since 1972. Nevertheless, Micro-Cap stocks showed weakness in 2019.
Micro-Cap stocks have provided the best returns in both 1972 and 2006. The best CAGRs over the past several years have been provided by WAMVX. The fund has also been ahead in 2021. However, WAMVX’s turnover ratio is quite high at 63%. This means that the fund will have to produce a high gain in order to produce a high distribution. In addition, the fund’s investment advisor, Wasatch Advisors, Inc., has agreed to reimburse Investor Class shares for any excess operating expenses.
The fund’s portfolio value has been calculated to be $293,185,057. In addition, the fund’s latest SEC filings have disclosed 85 total holdings. These holdings include CS Disco, Inc. (US:LAW), National Bank of California (US:NBC), and Xcel Energy (US:XEC). The fund is managed by Ken Korngiebel, who is also the lead portfolio manager. In addition, Thomas Bradley is the associate portfolio manager. He joined the Advisor in 2014 as an analyst on the small-cap research team. In addition, Bradley conducted iron metabolism research. During his college career, he was a lab technician at the University of Utah Medical School. He also earned a Bachelor of Arts in Japanese Language and Literature from the University of Utah and a Bachelor of Science in Social Sciences from the United States Air Force Academy. In addition, he earned a Master of Business Administration from California State University, Sacramento.
Walthausen Small Cap Value
WSCVX is a small cap value fund that has had a great run. It has outperformed 98% of its peers over the past decade, and it’s a strong long-term performer. But it has had to deal with the macro headwinds of the past few years. And this pro-micro/value policy shift could be a good opportunity for the fund.
A more lenient regulatory environment is a big boon for microcap biotech stocks. For example, Iovance Biotherapeutics, Xencor, and Fate Therapeutics are all top performers, and they all have tools to deliver solid returns over the long term. Iovance is in the process of launching a new drug to treat pain, and the company has already demonstrated a few other notable achievements. Amgen is another one of the top performers, and its stock has outperformed the market this year. However, geopolitical tensions could still affect the company’s stock price. It’s also worth noting that the company has invested in fleet improvements and collection station upgrades, which should improve cash flow.
