In this article I wanted to examine several small-cap pharma plays that currently meet two important criteria, and have very low debt to total cash ratios. First, I wanted to look at companies that have a market cap under $500 million. Second, I wanted to find companies that have debt to total cash ratio under 25%. Based on my findings, three companies stood out, all of which I'm considering a position in.
Galena Biopharma, Inc. (GALE), which trades in a 52-week range of $0.36/share (52-week low) and $3.54/share (52-week high), has a market cap of $105.70 million dollars. GALE currently has $8.70 million in total cash on its books (it should be noted that the company currently has -$16.53 million in operating cash flow, and $8.16 million in free cash flow) and only has $1.06 million in total debt. That equates to a debt to total cash ratio of 12.18%. Currently trading at a 25.19% premium to its 200-day moving average, GALE has demonstrated positive progress with regard to its NeuVax immunotherapy, which is currently being used in Phase I/II clinical trials.
Nanosphere, Inc. (NSPH), which trades in a 52-week range of $0.89/share (52-week low) and $3.45/share (52-week high), has a market cap of $150.82 million dollars. NSPH currently has $31.76 million in total cash on its books (it should be noted that the company currently has -$29.44 million in operating cash flow, and -$16.27 million in free cash flow) and actually has zero in total debt. That equates to a debt to total cash ratio of 0%, which in my opinion, is a positive catalyst moving forward. Currently trading at a 86.9% premium to its 200-day moving average, NSPH has been upgraded to a Buy Rating at both Roth Capital. The firm which "expects Nanosphere's placements of its BSI gram test to accelerate in Q3 following recent FDA clearance", also raised its price target to $4.50/share.
Orexigen Therapeutics, Inc. (OREX), which trades in a 52-week range of $1.22share (52-week low) and $6.55/share (52-week high), has a market cap of $408.7 million dollars. OREX currently has $138.58 million in total cash on its books (it should be noted that the company currently has -$23.42 million in operating cash flow, and -$10.64 million in free cash flow) and actually has zero in total debt. That equates to a debt to total cash ratio of 0%, which in my opinion, is a positive catalyst moving forward. Currently trading at a 71.3% premium to its 200-day moving average, OREX currently has a weight-loss drug of its own called Contrave, which many believe could hit the market as early as 2014.
Disclosure: I am long GALE, OREX.
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