On Friday, small cap biotech stocks Spherix Incorporated (NASDAQ: SPEX), China Biologic Products (NASDAQ: CBPO) and Cleveland BioLabs (NASDAQ: CBLI) surged in price. Specifically, SPEX rose 96.30%, CBPO rose 17.08% and CBLI rose 9.89%. However, a surging biotech stock should always be viewed cautiously by investors as there are a number of factors that can just as quickly cause one to sink. Hence, here is a closer look at all three biotech stocks to help you decide on an investment strategy:
Spherix Incorporated (NASDAQ: SPEX) Reports Positive Drug Treatment Results
Spherix was founded in 1967 and operates through two divisions: 1) Biospherics Incorporated which develops and licenses/markets proprietary therapeutic products for the treatment of diabetes, metabolic syndrome and atherosclerosis and 2) Spherix Consulting which provides scientific and strategic support for the food and other industries. At the end of last week, Spherix announced that its drug candidate, SPX-106, had achieved statistically significant reductions in certain types of cholesterol in genetically engineered mice prone to dyslipidemia. Hence and on Friday, Spherix rose 96.30% to $2.65 (SPEX has a 52 week trading range of $1.23 to $21 a share). However, investors should note that Spherix reported a 2Q2011 net loss of $1.0 million verses a net loss of $2.6 million for 2Q2010 mainly due to lower research and development (R&D) costs. On the other hand, Spherix ended the 2Q2011 with cash and cash equivalents of $5.6 million and working capital of $5.6 million verses $5.6 million and $4.9 million (respectively) for the end of last year. It should also be noted that Spherix had raised $2.5 million in a registered direct offering of common stock and warrants during 1Q2011.
China Biologic Products (NASDAQ: CBPO) Recently Had 4 Plasma Collection Stations That Account for 1/3rd of Its Plasma Shut by the Chinese Government
China Biologic Products is one of the leading plasma-based biopharmaceutical companies in China. On Friday, China Biologic Products rose 17.08% to $8.50 (CBPO has a 52 week trading range of $6.85 to $18.73 a share) on no apparent news in the western press. However, investors should note that at the beginning of August, four of China Biologic Products’ plasma collection stations in Guizhou province were unexpectedly closed at the direction of the Guizhou Provincial government's newly imposed plan and policy. These plasma collection stations accounted for approximately 34.1% of CBPO’s total raw plasma volume collected in 2010. Otherwise, investors should note that for 2Q2011, China Biologic Products’ total sales in US dollars rose 1.9% to $41.7 million from 2Q2010 thanks to a 4.8% foreign exchange translation gain but total sales denominated in RMB fell 2.9% compared to the same period last year. Nevertheless, China Biologic Products’ net income did rise 28.3% to $16.6 million.
Cleveland BioLabs (NASDAQ: CBLI) Saw an 86.5% Drop in 2Q2011 Revenue
Cleveland BioLabs is a biotechnology company leveraging proprietary discoveries around programmed cell death in order to create a robust pipeline of drugs for multiple medical and defense applications. On Friday, Cleveland BioLabs rose 9.89% to $2.89 (CBLI has a 52 week trading range of $2.10 to $9.60 a share) on no apparent news. However, investors should note that for 2Q2011, Cleveland BioLabs’ revenue fell 86.5% from $4,210,763 for 2Q2010 to $569,049 due to a decrease in revenue from various federal grants and contracts. On the other hand, Cleveland BioLabs reported net income of $11,130,148 thanks to “other income” that resulted from a $17,815,964 decrease in a warrant liability – meaning that investors will need to thoroughly scrutinize CBLI’s financials. Otherwise, investors should also note that back in June, Cleveland BioLabs was added to Russell 3000 Index and the company completed a $23.5 million stock offering in order to help accelerate the development of one of its treatment drugs.
The Bottom Line. Again, investors should be cautious after the sudden price surges of biotech stocks SPEX, CBPO and CBLI and take the time to examine the financials of each company in-depth