These Three Biotech Stocks Show Promise Amid AI Unknowns
I'm eyeing these small-cap drug developers that could take off in 2025.
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AI related stocks have had a solid rebound since their debacle on Monday, which knocked nearly $600 billion of market cap off of Nvidia NVDA in a single day. I expect this swath of the market will remain volatile in the near term. There have been plenty of gains to consolidate after two years of a mostly uninterrupted rally. Investors and fund managers will need some time to process whether the AI narrative remains fully intact or determine maybe these related stocks and sectors have gotten ahead of themselves.
The good news is that there are still plenty of sectors that investors can find good growth prospects within. Today, I am going to highlight several small cap healthcare names here where I think growth is undervalued. Here goes:
Dynavax Technologies DVAX is first on the list. I cover this biotech name at least a few times a year, as it has been a great "rinse, wash, and repeat" covered-call trade for my portfolio for many years now. But 2025 feels like the year the stock will finally break out of its trading range on the upset.
Its best of breed hepatitis B vaccine, Heplivav-B, continues to gain market share in a growing market. This brought in nearly $270 million of revenue in fiscal 2024, up 26% from fiscal 2023. The company has turned consistently profitable as well and projections are for earnings per share to double in fiscal 2025 on 20% revenue growth. Finally, the company is using some of its huge cash hoard to buy back stock.
CorMedix Inc. CRMD is another name to watch. I added some shares to my stake in CRMD yesterday. The stock has drifted back some after a huge spike up after disclosing preliminary fourth-quarter revenues on Jan. 7 that blew away expectations. The company has just started the marketing rollout of a recently approved an antimicrobial catheter lock product called DefenCath. Like Dynavax, CorMedix may have a best of breed product.
It certainly is one of the more successful initial rollouts I have seen in some time. Management guided Q4 revenues to $31 million three weeks ago. This was far over the most bullish analyst estimate and up dramatically from under $12 million in sales from the previous quarter. The company is on track to become profitable much faster than initially expected when DefenCath launched.
TriSalus Life Sciences, Inc. (TLSI) is the latest small cap name in my portfolio. I took a small "watch item" stake in the stock this week and will leg into a larger position if the story continues to evolve positively. Some insider buying in the equity in January put the stock on my radar. The company develops and markets drug delivery technologies and immune-oncology therapeutics for the treatment of liver and pancreatic cancer.
Thanks to recent launches, revenues in the first three quarters of fiscal 2024 were up 66% on a year-over-year basis to just over $21 million. Management has recently guided that it expects sales growth to be at least 50% in fiscal 2025 and operating expenses to also fall 20% for the fiscal year. As importantly, the company expects to become cash flow positive in the second half of fiscal 2025. With a market cap of just over $150 million, TLSI is one of the smallest companies in my portfolio, but it is a story I want to keep an eye on.
At the time of publication, Jensen was long DVAX, CRMD, TLSI.
