Finding Value in Two Cheap, Small-Cap Biopharma Names
I am still finding some value in the biotech and biopharma sectors.
You're reading 0 of 1 free page.
Register to read more or Unlock Pro — 50% Off Ends Soon
In my column on Friday, I highlighted that year-over-year earnings growth for the S&P 500 is projected to slow significantly in the third and fourth quarters from the profit growth in recent quarters. There are myriad reasons for this tepid outlook. Among these are new tariffs getting fully implemented, anemic global growth and a falling greenback.
I noted that I am still finding some attractive names in the biotech and biopharma sectors that have good long-term earnings prospects and are still reasonably valued. I then profiled one of these concerns in the form of Gilead Sciences GILD in my piece on Sunday. Today, we will look at a couple of smaller-cap names that also meet these criteria.
Let’s start with Pacira BioSciences PCRX. This biopharma name is focused on developing and commercializing non-opioid pain management drugs and is headquartered five hours northwest of me in Tampa, Florida. Pacira’s bread and butter product is called Exparel, which is a long-acting amide local anesthetic used for postsurgical analgesia.
This franchise compound has been boosted this year by receiving a J-code that went into effect at the start of 2025. This is improving reimbursement. The company also won some recent patent litigation victories that should extend Exparel’s patent production into the late 2030s. In addition, Pacira has an extended-release, non-addictive pain treatment for osteoarthritis knee pain called Zilretta on the market. Additionally, the product is being evaluated for shoulder pain and hopefully will be extended into that indication in 2027. Pacira has one pain management device on the market that currently garners sparse revenues and one promising pipeline pain management drug in mid-stage development.
Sales should be up around 6% this year. Earnings will be off slightly but should rebound sharply in FY2026. The company is optimizing its manufacturing process and recently laid off 6% of its staff, whose benefits will fall fully to the bottom-line next fiscal year. Finally, the company’s manufacturing capacity is almost fully in the United States and thus should see little impacts from new tariffs. Pacira has a solid balance sheet and trades at a cheap eight-times trailing profits.
Harmony Biosciences Holdings HRMY is another cheap, small-cap biopharma name I last mentioned in early June. Harmony’s primary asset is called WAKIX and is one of several products approved for narcolepsy. While patent protection for this franchise drug should expire in 2030, a new improved version and patent protected upgrade should be out in 2028. The company also has a late-stage candidate to treat Fragile X Syndrome in development.
Harmony is one of cheaper names on the market. The company is projected to continue to deliver earnings growth of 20% or higher in coming years as revenues rise in the mid-teens. The stock goes for just over 12-times forward earnings. It is even cheaper given roughly 25% of its current market cap is represented by the net cash on Harmony’s balance sheet.
At the time of publication, Jensen was long GILD, HRMY and PCRX.
