2 New Oncology Focused Small-Cap Biotechs to Keep an Eye On

The biotech sector has held up better than one would expect during the carnage and volatility in the markets over the past couple of months. The lows this sector made in mid-June have formed a firm floor and hopefully this will mark a generational low.

Of course, the sector still trades for less than half of its levels to start 2021 as the starch has completely come out of the high beta parts of the market mainly due to the relentless rise in interest rates.

However, with scores of small biotech names still selling for significantly less than the net cash on their balance sheets, biotech had clearly gotten to oversold status. Once M&A activity picks up, I could see the sector easily rallying 20% or more.

Towards that end, I have started to pick up some very small initial stakes in some new small-cap biotech names, and, I will highlight a couple of these. Let’s start with Tango Therapeutics, Inc. (TNGX) .

This company is early staged with a couple of drug candidates in the pipeline. Tango is focused on the development of therapies that target tumor suppressor gene loss in defined populations with high unmet medical need. It is using “relatively unexplored” approach in oncology.

This approach seems to have received significant validation as the company has a major and wide-ranging collaboration deal with Gilead Sciences (GILD) that involved a $125 million upfront payment as well as a $20 million equity investment. The stock also has seen some recent insider buying by a beneficial owner and trades for slightly less than the net cash on its balance sheet.

PDS Biotechnology Corp (PDSB) is also a new ‘watch item’ position in my portfolio. Like Tango, the stock sells for just under $5 a share and is focused on oncology candidates. Unlike Tango, the equity had options against it, so I was able to establish a small stake in it via a covered call strategy.

Management believes it has a proprietary develop platform that can train the immune system to unleash a powerful and targeted T-cell attack which can dramatically improve treatment and patient outcomes across the cancer spectrum.

PDS Biotechnology’s lead drug candidate is PDS0101. The compound has Fast Track designation as part of a combo therapy with Merck’s (MRK) Keytruda for recurrent or metastatic HPV16-positive head and neck cancer. The FDA recently greenlighted a registrational trial for this indication ahead of schedule, a rarity with the government agency these days.

The same compound is also in mid-stage development for other indications. Finally, the company has plenty of funding in place to advance its pipeline without a capital raise in these volatile markets.

And those are two new small biotech names to watch.

(Please note that due to factors including low market capitalization and/or insufficient public float, we consider PDSB to be a small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.)