I write because, if I don't, my characters will murder me in my sleep. - Astrid Cruz
We continue our series of reviews of Q2 results at previously profiled small biotech concerns today. In today's article, we revisit BioDelivery Sciences' (BDSI) Q2 results that showed impressive revenue growth that was significantly over expectations. The company remains on track to produce positive cash flow by year end and seems undervalued in this skittish market.Company Overview:
BioDelivery Sciences is a North Carolina based specialty pharmaceutical company. The firm is focused on pain management. The company's main product is BELBUCA whose main ingredient is Buprenorphine. This product is for pain management and has a relatively low risk for developing dependence. This product's impressive growth is a product of the country's increasing focus on its opioid crisis and the need to find less addictive pain management solutions. The stock currently has a market capitalization of approximately $390 million and trades right around $4.40 a share.
The company posted a loss of 13 cents a share, a dime a share below than the consensus. It should be noted that BioDelivery had EBITDA in the second quarter of 2019 of $4.8 million or 16.1% of total net revenue. This compares with $0.1 million in the first quarter of 2019 and ($5.6) million in the second quarter of 2018. Non-GAAP net income for the quarter was a positive $4.4 million.
Revenue growth was very impressive as the company posted sales of $29.7 million, up 144% from the year-ago period and above expectations.
BELBUCA accounted for $24.1 million of that total. Newly acquired Symproic® had an impressive launch in the hands of BioDelivery and posted $3.2 million in revenues during the second quarter.
The company raised forward guidance across the board as well. BioDelivery now expects net sales in FY2019 to come in within a range of $101-105 million, from the previous level of $92-100 million. The company also raised its long-term combined net sales expectations for BELBUCA and Symproic to a range of $425-500 millionAnalyst Commentary & Balance Sheet:
The current median analyst price target is just over $6.00 a share. H.C. Wainwright reissued their Buy rating and $6.50 price target on BDSI Friday with this brief commentary on valuation.
We maintain a conservative view on Symproic-far below the long-term $75-100M target-until the company shows it can drive material volume and share growth. We think it's a best-in-class product, but the space remains competitive.
The company ended the second quarter with just over $55 million in cash and marketable securities on the balance sheet. More importantly, management anticipates having positive operating cash flow by the fourth quarter of 2019 and important milestone, obviously.Verdict:
The company continues to show impressive growth in BELBUCA scripts and sales. Recently acquired Symproic also seems to be off to a good start in the hand of BioDelivery as well. The company is on its way to achieving cash flow positive status by the close of this year. Selling at less than one times the eventual annual sales management believes it can achieve with BELBUCA and Symprioc, the shares remain cheap.
An efficient way to add exposure or initiate a new position in BDSI is via a Buy-Write order. Using the March $5 call strikes, fashion a Buy-Write order with a net debit in the $3.70 to $3.80 range (net stock price - option premium). This mitigates a bit of downside risk and sets up a solid potential return for it's just over a seven-month hold period.
If you don't know where you're going, any road will take you there . - Brian Bianco, Dressed for a Kill
Bret Jensen is the Founder and author of articles on The Biotech Forum, The Busted IPO Forum, and The Insiders Forum. To receive these articles as published on Seeking Alpha, just click the appropriate link and hit the orange follow button
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Disclosure: I am/we are long BDSI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.