Buying 2 Small-Cap Healthcare Names After Breakthroughs
Here are a couple of small cap names I am adding exposure to in my portfolio.
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After a big sell-off in the early part of April triggered by the announcement of reciprocal tariffs, bulls have re-seized control of the market.
The NASDAQ is at all-time highs after briefly entering official bear market territory just 10 weeks ago. The S&P 500 is also on the verge of its highest mark ever as well and is up around 5% this year including dividends. The small-cap Russell 2000 has underperformed its larger brethren throughout the year and is down just over 2% so far in 2025.
In my final column for the trading week, I am going to highlight two small caps I have recently been adding to within my portfolio.
I added significantly to a small stake in a small cap oncology named Verastem, Inc. VSTM this week via covered call orders. The stock has been cut in half since its highs in late May. Of course, the shares had recently rallied some 80% to that point off their lows in mid-April, it should be noted.
These moves have some "buy the rumor, sell the news" feel to them. In May, the FDA approved its oral RAF/MEK inhibitor avutometinib as part of a combination therapy with defactinib to treat second-line treatment for KRAS-mutated recurrent low-grade serous ovarian cancer. The approval was well supported by trial data and came nearly two months before the scheduled PDUFA date.
Avutometinib is also being evaluated as part of a combination therapy with Amgen’s AMGN sotorasib to treat patients with KRAS G12C mutant non-small cell lung cancer or NSCLC. That effort is in early-stage development as is another with a different oral KRAS Inhibitor in the company’s pipeline that should kick off a Phase 1/2a study in the coming months. The stock’s market cap is around $225 million, and the company has approximately $190 million of cash in its coffers.
While Verastem is bleeding cash somewhat, revenues from avutometinib should start to cut into that quarterly cash burn rate in the coming quarters. The stock is universally loved by the analyst firm community which has a median price target on the shares in the mid-teens. After the recent pullback, the stock trades just over $4 a share.
I am also about to add some exposure to CorMedix CRMD to my portfolio. I have highlighted this healthcare name several times in 2025, and I already have a quite large holding in it. However, given the position is held within covered call holdings, most of it is going to expire in the money in the coming months as the shares have shot higher this year.
And they have rallied for a good reason. The rollout of its antimicrobial catheter lock solution DefenCath is just beating every expectation and rapidly becoming a "best of breed" solution in its market.
It seems every month this year, management has boosted sales guidance for DefenCath. As a result, the stock has more than doubled since early April. The shares will be down by more than 10% early on Friday as the company is taking advantage of the rally in its shares to execute a small capital raise. That's more than likely to be the last one, before the company starts to print profits. I am going to use the decline on Friday morning to initiate some additional covered call holdings. These will help replace the ones that will be expiring in the month over the summer.
At the time of publication, Jensen was long AMGN, CRMD and VSTM.
