Solid Biosciences (Nasdaq: SLDB) a biotechnology company based in Cambridge, Massachusetts, which is engaged in the search for new methods of therapy for genetic diseases and the development of appropriate medicines. The business was founded in 2013 and went public in 2018 after listing shares on Nasdaq.
What he earns
All resources of the company are aimed at combating Duchenne myodystrophy - a genetic disease, in which patients from childhood experience muscle weakness and a decrease in intelligence. Symptoms progress over time and on average shorten the life of patients to 25-30 years. Solid Biosciences now has three developments.:
- SGT-001, the drug in the form of a single intravenous injection, which is undergoing the second stage of clinical trials. Involves a single injection followed by patient observation for five years.
- SGT-003, drug to combat the symptoms of Duchenne myodystrophy based on adeno-associated virus, undergoing preclinical testing.
- Joint drug with Ultragenyx for the treatment of Duchenne myodystrophy, which is also undergoing preclinical testing.
What's wrong
Capitalization decreased in 10 once. After entering the stock exchange, the company's share price rose higher 50 $ for paper, but soon began to fall rapidly and at the moment has come to current values less than the dollar.. This example illustrates the downside of an IPO well., each of which is advertised by future issuers as a unique opportunity for investors, but often ends with a similar protracted fall after a brief take-off. It's hard to imagine now, when Solid Biosciences shares can return to historical price highs.
Annual additional issue. Since 2016, the company has been steadily issuing additional blocks of shares - so far this is the only and most convenient way for business to raise funds.. This approach saves management from increasing debts and loans., but does not have the best effect on their relations with investors, whose share is systematically depreciating year after year. Initial 19 million shares in 2015 turned into 110 million in 2021 — the number of securities of the issuer increased almost in 6 once.
Soon to be profitable. The usual situation for biotechnology companies with chronic unprofitability in this case is complicated by tiny capitalization and systemic injection of new shares into the market - already now such methods of raising funds are exhausting themselves., and it is unlikely that Solid Biosciences will be able to rely on such a strategy for the next 5-6 years.. Therefore, the obvious lack of profitability on the horizon of 2-3 years creates additional pressure on the business..
What good
Stocks are cheap. Now SLDB securities cost less than a dollar apiece and are a convenient tool not only for speculative transactions., but also for a systematic and long set of positions. If a person has made a firm decision to invest in the company, then he will be able to competently plan his investments over a long distance, even with relatively modest capital..
The patient is financially healthy. The company does not have for the latter 5 years there were no debts, its short-term and long-term assets significantly exceed liabilities, and cash flows are stable - according to Simply Wall Street, at the current level of expenses, they should be enough for another 2.5-3 years., even if the company does not receive a single extra cent during this time.
Can buy. A company of such a small capitalization with specific developments and a vector of development can become attractive for the acquisition of large players in the biotechnological market., who always try not to miss a convenient chance to scale. Given the fundamental undervaluation and the P multiplier / BV, equal 0,45, even without development, the entire property of Solid Biosciences is worth twice its market capitalization., and investors at current quotes for each dollar invested in shares receive two dollars in the form of tangible assets of the business.
What's the bottom line?
Solid Biosciences – Classic Penny Stock, or "penny stock», which may be attractively priced, but at the same time carries high risks of volatility and manipulation of interested market participants. The company itself, with its current capitalization, may become an attractive target for purchase by larger players in the pharmaceutical sector., but such assumptions can hardly be the only and decisive argument in favor of investing in the issuer's shares..
