My Top Small-Cap Stock Pick for 2025 Is a Familiar Name
After I made this stock a top pick in December 2023, it gained 69%, and it still has substantially more upside.
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Market action is choppy but upbeat on the first trading day of 2025. Breadth is very strong, with 7,500 gainers and just 1,700 decliners. Small-caps are outperforming, with the Russell 2000 IWM up almost 1%. However, the Magnificent Seven MAGS is mixed with flat action, mainly due to pullbacks in Tesla TSLA and Apple AAPL.
I'm optimistic about some good trading in smaller stocks, as many names are oversold after a miserable December. There are already signs of bottom-fishing action, and I'll be highlighting some of my top picks for 2025 in the next week or so. My number one pick, Rocket Pharmaceuticals RCKT, is off to a good start.
On December 20, 2023, I named Xeris Biopharma Holdings XERS my top small-cap stock pick for 2024. You can read my reasoning here. On that date, the stock was trading at $2.01. It finished the year at $3.39 for a gain of about 69%, which isn't bad in a year when the biotechnology sector was around flat, but I believe it has substantially more upside potential in 2025.
Xeris develops and sells injectable and infusible therapies that are ready to use and stable at room temperature. It has two key proprietary technologies — XeriSol and XeriJect — that allow for the delivery of concentrated, non-aqueous formulations of proteins, peptides, small molecules, and antibodies.
Xeris currently has three products that are selling well. Gvoke is used for the treatment of very low blood sugar in adults and children with diabetes. However, Xeris' fastest-growing drug is Recorlev, which is a cortisol synthesis inhibitor that's used to treat high cortisol levels in adults with Cushing's syndrome.
These three products will do about $200 million in sales in 2024 and are growing at around 20% annually. If the company simply sold these three drugs and dropped its other development plans, it would be EPS positive and a very good value.
But what makes Xeris interesting is that it is leveraging its technology in some new areas, which offers potential substantial upside. Several large drug companies are evaluating Xeris' technology for subcutaneous delivery of drugs. Amgen AMGN is in a late stage of evaluation, and there are others, but this is highly secretive for competitive reasons. Licensing news could hit at any time and have a substantial positive impact on the stock.
Another exciting development is that Xeris should start trials for a subcutaneous form of levothyroxine, which is used to treat hypothyroidism. This is a drug that sold over $3 billion in the U.S. in 2023 in an oral form. There are challenges with the dosage that could be solved with the Xeris formulation. Xeris XP-8121, which is subcutaneous levothyroxine, has a potential market of over $1 billion if it solves some of the problems with the oral form as anticipated. Xeris will have meetings with the FDA in 2025, and analysts will start building some estimates for future income, which will move the stock.
The key to small biotechnology stocks like Xeris is to be ready to trade them. My positive size in the stock varies greatly depending on technical action and market conditions. I'm optimistic about Xeris in 2025 and will keep you posted on its progress in the year ahead.
At the time of publication, Rev Shark was long XERS and RCKT.
