When people say “penny stocks,” they usually don’t actually mean stocks that trade for pennies.

The SEC, in fact, defines the term as stocks that trade below $5.

However, we are about to look at a little-known stock that literally can be had for pennies per share.

With a price of about $0.10 a share and a market capitalization of roughly $20 million, BioPharmX (NYSE American: BMPX) is the stock market’s version of a lottery ticket.

The market valuation of the company is low for a reason: expectations are very, very low. The stock could go to zero, but if things go better than the market expects, the stock could result in large percentage returns.

Surely, at $0.10 a share, the stock price can fall another $0.10 at most. On the other hand, even if the stock went up just $0.20, that’s already a 200% gain.

But, it’s a bad idea to jump at a stock just because the price is low. Let’s take a look at BMPX and see if it’s worth a gamble.

What Is BioPharmX?

BioPharmX is a tiny biotech company focused on the dermatology market.

The company currently has two advanced drug candidates in the pipeline.

The most advanced candidate is designated BPX-01, which has completed Phase 2 and is on its way to Phase 3. It’s a drug that treats inflammatory lesions of acne.

Acne is caused by blockage of hair follicles and affects an estimated 50 million Americans. The U.S. market for prescription acne medication is about $4 billion per year.

BPX-01 is basically a combination of an oral antibiotic drug called minocycline with the company’s patented drug delivery system called HyantX, a delivery system that allows the skin to absorb the medicine to the affected layer more efficiently and quickly.

BioPpharmX says that the HyantX delivery system reduces the dosage needed, and keeps the drug more localized to increase effectiveness and minimize side effects. Furthermore, it eliminates the common problem of oils and ointments remaining on the skin, leaving the skin feeling oily due to a residue.

In Phase 2 study, BPX-01 showed a statistically-significant reduction in acne lesions compared to vehicle (placebo) and no detectable amounts of minocycline in the blood in almost every patient. The one patient that did have detectable traces had less than 1/10 of the typical amount after taking minocycline orally.

BioPharmX’s other advanced candidate is BPX-04, which again teams HyantX with minocycline. The difference is that the target condition is rosacea, instead of acne. This condition affects an estimated 16 million Americans and has similar symptoms to acne. Unlike acne, the exact cause of rosacea is unknown.

The Phase 2 study for BPX-04 is ongoing. Preliminary data suggest some positive impact of minocycline on rosacea lesions and for clearing the skin.

How Has BioPharmX Stock Performed?

BioPharmX launched an initial public offering (IPO) in July 2015. As you can see from the chart below, the IPO’s results so far haven’t been pretty. It’s a reminder that investors shouldn’t commit too much money to speculative bets.

In 2017, the company completed its Phase 2 study for BPX-01.

BPX-01 met its primary endpoint by reducing the number of lesions. However, it did not meet its secondary endpoint of achieving a two-point reduction in the Investigator’s Global Assessment (IGA) scale to “clear” or “almost clear.” In other words, the drug did not show statistically significant superiority in giving patients clear skin, compared to vehicle.

The primary endpoint is the main outcome that a clinical trial tries to measure. The secondary endpoint is a relevant question one may ask about the same study.

BPX-01 did meet its endpoint, which means the drug has shown enough to progress to Phase 3 study. But the failure to meet the secondary endpoint had investors wondering about the market potential of the drug.

Obviously, if BPX-01 shows that it is about to return patients to clear skin, it will much more likely become a hit. The fact that it didn’t dampened enthusiasm.

How Has BioPharmX Stock Performed In 2017/2018?

As noted above, Phase 2 data was good enough to keep the drug testing going but investor expectation for market potential went down.

Coupled with low expectations, the company is in danger of being delisted from the NYSE American exchange. To be listed on the exchange, a company needs to meet certain financial requirements. BioPharmX currently does not have enough retained earnings on its balance sheet to qualify for continued listing due to its consistent lack of profitability.

BioPharmX has submitted a plan to NYSE Regulation to regain compliance with the requirement. It will have until September 24, 2019 to do so and NYSE Regulation could periodically examine the company to see if progress is being made. If the company fails to show progress or fails to regain compliance by the deadline, NYSE American could initiate delisting procedures.

As part of its plan, BioPharmX laid off a third of its workforce and discontinued some non-core operations and reached a settlement with certain warrant holders to exercise their warrants for $2.8 million in cash.

The situation isn’t encouraging, prompting some shareholders to give up and move on.

Who Are BioPharmX’s Rivals?

Bausch Health (NYSE: BHC)

Formerly known as Valeant, Bausch is a multinational specialty pharmaceutical company that sells a large number of products in various areas. One of its best-known brands is eye-health brand Bausch and Lomb.

In the area of acne, the company has several prescription drugs including Solodyn, Atralin, Acanya, and Ziana. Solodyn in particular is branded minocycline, the antibiotic BioPharmX is testing as BPX-01 and BPX-04. Solodyn is taken orally as a pill and used to treat moderate to severe acne. It’s only approved to specifically treat red pus-filled pimples in patients over 12 years of age.

Solodyn is competing against generic versions of itself and it will compete with BPX-01 if BioPharmX were to successfully bring it to market.

Bausch does not break down its sales, but according to prescription tracking data, Solodyn had approximately $148 million in 2017 sales.

Spear Pharmaceuticals

Spear Pharmaceuticals is a private company that sells several versions of tretinoin gel (generic version of Bausch’s Atralin.

Tretinoin is a form of retinoic acid and has been around since the 1960’s as an acne treatment. The drug has even been used as treatment for leukemia.

In regards to its use to treat acne, tretinoin can irritate the skin for certain patients. In addition, pregnant women should not use it, and people who use it should not apply any other cream or gel products that dry the skin.

Aclaris Therapeutics (NSDQ: ACRS)

Aclaris is a small-cap U.S. company that specializes in dermatology.

Aclaris recently acquired Rhofade from Allergan (NYSE: AGN). In 2017, the FDA approved Rhofade as treatment for facial redness caused by rosacea.

The drug works by narrowing blood vessels in the skin to decrease redness. The patient has to apply the cream to the entire face once a day. The cream can cause skin inflammation, swelling, itching, and even worsening of redness.

Will BioPharmX Stock Go Up In 2019 (Should You Buy)?

The fact that BPX-01 didn’t show meaningful clearing of skin in acne patients compared to the control group is disappointing. But early data in the ongoing Phase 2 study for BPX-03 showed the drug significantly cleared all 15 rosacea patients’ face redness after 12 weeks of treatment.

And even though BPX-01 trial results so far haven’t been great, the drug is still progressing to Phase 3 and, if approved, should generate some revenue.

The value is really in the HyantX system, which could enable the company to explore taking other generic drugs and repackaging them as its own by changing the way the drug is delivered. The ability to use an existing generic drug lowers the cost compared to developing a drug from scratch.

There’s really no market excitement over this stock. A positive surprise could reignite some buying interest. For example, the company could end up on some larger company’s radar and get bought out.

Will BioPharmX Stock Go Down In 2019 (Should You Sell)?

The outlook is murky. BPX-01 data bring up serious questions about future market opportunity. Even if approved and brought to market, can the drug stand out from a crowded field of acne treatments?

The company had one product on the market that generated revenue. But to comply with listing requirements BioPharmX gave it up late in 2018 because it was a money loser. The company also gave up two other (early) candidates that it was working on.

The company was down to $3 million in cash and cash equivalents as of the end of October 2018. If you add the $2.8 million raised from the warrant deal noted above, the company’s total cash on hand still only comes to under $6 million, which might not last a year. That wouldn’t be enough time for BPX-01 to start contributing revenue. The likely outcome is dilutive equity offerings in the near future.

The company’s best hope is to find a partner who’s willing to fund the development of BPX-01 and BPX-03, or a downright buyout.

Overall BioPharmX Forecast And Prediction For 2019

Things look bleak for BioPharmX. It needs a good break. But when things look terrible is often the best time to buy a stock.

That said, BPMX is only for investors who love to speculate.

If the company can get a fresh injection of capital from someone, that should help the share price immensely, but that’s a huge “if.”

There’s just not enough excitement surrounding BioPharmX’s weak pipeline right now to expect any deal to be on the horizon. It could happen, but to expect one is a big leap in faith.

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