2 New Biotech Stocks on the Radar While the Market Struggles
I’m watching these small-cap names as I look harder to put cash to work.
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The market is struggling again on Tuesday as it deals with renewed worries about tariffs and extended technical conditions. There isn’t a rush for the exits, but buyers are not showing much interest, and breadth is still running positive. The Magnificent Seven MAGS are weak while the Russell 2000 small-cap index IWM is in the green.
The key issue isn’t the news flow but the technical condition of the indexes. The tariff news matters, though, because it is a convenient excuse to be more cautious, raise a little cash, and do some repositioning.
With earnings season fast approaching, there will be more focus on individual stocks and less on the macroeconomic issues. Many stocks have recently become extended, which makes them ripe for a "sell-the-news" reaction to "good" earnings news.
Against this backdrop, I’m looking harder to put some cash to work and started a small position this morning in Nektar Therapeutics NKTR. NKTR exploded higher on June 24 on Phase 2b atopic dermatitis trial results. Atopic dermatitis, which is commonly known as eczema, has a very large market opportunity.
Analysts called the data "paradigm-shifting" with a "highly-differentiated mechanism of action." Price targets were raised substantially, and the average is $98.50, which is almost 4x the current price of around $22.80.
Nektar did a quick spot secondary offering on July 1 at $23.50. The stock has moved below the offering price by about $1, which I believe is a good opportunity to take a small initial position. There isn’t any immediate catalyst on deck, so the stock may continue to drift around, but I want to put it on my radar screen and watch how it develops.
It is expected that there will be more detailed data released at a conference later this year, and there is also another indication for alopecia areata (a form of patchy hair loss) with data coming fairly soon.
My goal is to put this stock on my list and to watch it closely for an opportunity to build it up at the right time.
Another name, Apogee Therapeutics (APGE), also had good results for its atopic dermatitis drug. Despite good results, the stock sold off. Analysts at Citi were buyers and said this was a major de-risking event and that the data were very compelling. I plan on putting this name on my radar as well and see how it develops.
With the market struggling, it is a good time to do research and put new names on the radar screen.
At the time of publication, Rev Shark was long NKTR.
Please note that due to factors including low market capitalization and/or insufficient public float, we consider NKTR to be a small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.
