While investing in the equity market, who would not like to see his money grow exponentially regardless of market condition and economic cycles, but for having an exponential growth in your portfolio stocks, your stock selection should be good. One should spend a considerable amount of time to identify the trends of the prevailing market and then select stocks to buck the trend. Healthcare Facilities, Biotechnology, Medical Devices and Pharmaceuticals stocks have so far performed relatively better than many other sectors amid the market meltdown triggered by the outbreak of novel COVID-19, which started from the mainland of China and now grappled about 220 countries around the world.
In this piece of work, we are talking about two small-cap biotechnology stocks which have performed significantly well despite market mayhem. So, let us understand the secret sauce behind the recent rally in these two biotechnology counters.
AVACTA GROUP PLC (LSE: AVCT)
Alternative Investment Market-listed Avacta Group Plc is a biotechnology company with a market capitalisation of £137.31. The group has developed a technology, Affimer which is helping in the performance limitation of antibodies. The company has also engaged in providing pre-clinical programmes and commercialising of reagents through licensing to developers of diagnostics and life science research tools.
The company recently started a trial for binding the SARS-COV-2 viral antigen. The group announced that it got success in the first four weeks of the commencement of the trial and generated multiple Affimer regents to bind the viral antigen. The group entered into a collaboration with Cytiva to develop a rapid test for the coronavirus infection.
The company also owns IP related to the SARS-COV-2 affirmer reagents and also holds commercial rights as well. It is also in close negotiation with global diagnostic companies to develop Affimer-based COVID-19 antigen tests to increase high-throughput testing capacity on a worldwide scale.
The rapid antigen tests to diagnose COVID-19 is crucial to limiting and tracking the spread of this disease and Avacta can produce it in bulk for the professional screening of large populations, and for self-testing by consumers themselves.
Stock Performance – Zoomed 352% on a YTD basis.
The above news drove its shares higher on LSE, on a year-to-date basis, AVCT shares have zoomed by ~ 352% to GBX 78 (on April 23, 2020), and on the month-to-date basis its shares have leapt up by massive 259%. The kind of return its shares have handed regardless of a bloodbath in the broader market is astronomical.
Also, on a YoY basis, its shares are featuring a stupendous return of ~ 135%. The relative outperformance of its shares against the benchmark on a YTD and YoY basis stood at 485% and 203%, respectively, which is gigantically high, given the current market condition.
In a year-over period, its shares have registered a 52-week high of GBX 97.0 (on April 22, 2020) and a 52-week low of GBX 12.62 (on March 17, 2020). Also, at last closing price, its shares traded well above its short-term and long-term support level of 5-day, 10-day, 20-day, 50-day, 100-day and 200-day moving averages, which is not common amid the current market environment.
At the time of writing (as on April 24, 2020, at 10:29 AM GMT), its shares have further added 9.0 points or 11.5% and quoting at GBX 87.0.
Circassia Pharmaceuticals PLC (LSE: CIR)
Alternative Investment Market – listed Circassia Pharmaceuticals PLC is Oxford, UK – based biotechnology company. The company’s outstanding market capitalisation stood at £99.43m, which ranks it among the small caps listed and traded on the LSE.
The company is in world-class speciality pharmaceutical business focused on respiratory disease and operated through three segments: Allergy, NIOX and Respiratory. Allergy segment is involved in producing drugs related to allergic treatment. NIOX segment is involved in the development of the products related to asthma detection and management while Respiratory segment develops the product to treat the chronic obstructive pulmonary disease. The Company distributed its market-leading NIOX® asthma management products directly to specialists situated in the United Kingdom, United States, China, and Germany, and also in other geographies through its network of partners. Recently, the company got approval from the US FDA for Tudorza® (a drug for chronic obstructive pulmonary disease). The group was entered into a strategic collaboration with AstraZeneca in 2017 for the development and commercialisation of the said drug.
The group recently announced that it is terminating its development and commercialisation agreement with AstraZeneca. Once the agreement is dissolved, AstraZeneca will trade its loan to CIR in exchange for the commercial rights of Tudorza® and Duaklir® for the US.
The unique business model of Circassia Pharmaceuticals PLC helped its shares to leapt upon the LSE. On a year-to-date basis, CIR shares have surged approximately 40% (as on April 23, 2020), and on a month-to-date basis, its shares have soared up approximately 58%, which is impressive given the meltdown in the broader market and especially in the small-cap and mid-cap arena.
However, on a YoY basis, its shares are sporting a negative price return of ~ 11%, even though the relative performance of CIR is better than the benchmark FTSE AIM AllShare index. The stock has significantly outperformed the benchmark FTSE AIM AllShare on a year-to-date and month-to-date basis.
In last one year, its shares have tested a 52-week high price level of GBX 32.52 (on April 29, 2019) and a 52-week low of GBX 12.50 (on March 20, 2020), At the closing price of GBX 26.50 (on April 23, 2020), its shares traded approximately 112% above its 52-week low price level and around 23% below its 52-week high price level, respectively. The stock is trading well above of 20-day, 30-day, 60-day and 200-day moving averages as on 23 April market close.
At the time of writing (as on April 24, 2020, at 11:18 AM GMT), its shares traded approximately 0.75% higher against the yesterday's close at GBX 26.70.