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'Raymond James goes positive on Gemphire (GEMP) and initiates the stock as a new Buy with a $22 price target. James' analyst states that its product "gemcabene offers a potentially differentiated profile in the dyslipidemia space, which should narrow the gap versus peers with successful data". Results from a Phase 2b study for the treatment of severe hypertriglyceridemia using gemcabene should be out sometime this quarter. Last week, Canaccord Genuity maintained its own Buy rating on GEMP with a more optimistic $31 price target. '
Given this, we thought we would take a deeper dive on this small cap biopharma today to see if its an investment ‘gem’ or common mineral. Our findings are presented in the paragraphs below.
Gemphire Therapeutics is a Michigan-based biotech concern with the objective of developing therapies to address cardiometabolic disorders, including dyslipidemia and NASH. The stock came public in the second half of 2016, has an approximate market cap of $90 million and currently trades at just under $6.50 a share.
The company's pipeline consists of gemcabene which the company considers a 'pipeline in a product' and that was licensed from Pfizer (PFE) in 2011. As Gemphire describes gemcabene as a small molecule formulated as a tablet and that is cost effective to manufacture. As a once‑daily, oral therapy, gemcabene, if approved, would be more convenient than other non‑statin therapies, many of which require frequent injections or multiple daily doses.
To date, the compound has had a clean safety profile based on 20 completed studies in just under 1,000 patients in total. As can be seen from the chart above, gemcabene is aimed at a variety of indications in various stages of development. We should get several key readouts around trial results for gemcabene over the next few quarters.
Severe Hypertriglyceridemia - Phase 2b - Due out sometime in the second quarter.
Familial Partial Lipodystrophy - Top-line Phase 2 - Due out before end of 2018
Nonalcoholic steatohepatitis (NASH) / Nonalcoholic fatty liver disease (NAFLD) - Phase 2 - First quarter of 2019
Analyst Commentary & Balance Sheet:
Two other analyst firms have reiterated Buy ratings on GEMP so far in 2018 outside those noted previously. They are Roth Capital ($30 price target) and H.C. Wainwright ($28 price target). Gemphire ended the first quarter with just under $35 million in the bank after raising ~$22 million in February via a secondary offering. The company is burning through approximately $7 million a quarter in expenses.
Gemphire has several 'shots on goal', enjoys strong analyst support, is aiming at some big potential indications and has several trial milestones on the horizon. However, the company is betting its entire future on one product and will have at least one more capital raise before it submits any indication for approval. Given this, I think the stock only merits a 'watch item' holding within a well-diversified biotech portfolio. If trial results are positive and the company addresses its longer term capital needs in the first half of 2019, we made revisit this name to see if it deserves a larger allocation at that time. No options currently exist against the equity, so the shares are not a Buy-Write candidate which is how I would prefer to play this concern at the moment.
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