Brickell Biotech Inc (NASDAQ: BBI) is a micro-cap stock with a $26m market cap. The BBI share price is subject to volatility and has plummeted 85% in the past year. Is this biotech skin treatment company worth a second glance?
What is Brickell Biotech?
Brickell Biotech develops prescription therapeutics to treat autoimmune, inflammatory and other debilitating diseases, focusing on skin problems. Its pipeline of therapeutics is designed to treat hyperhidrosis, allergic contact dermatitis, androgenic alopecia, cutaneous t-cell lymphoma and psoriasis.
The company recently obtained exclusive global rights to a portfolio of novel STING inhibitors from Japanese firm Carna Biosciences.
This deal gives Brickell exclusive, worldwide rights to develop and commercialize Carna’s Stimulator of Interferon Genes (STING) antagonists portfolio. They have high hopes these can be used to treat autoimmune disorders, such as systemic lupus erythematosus and rheumatoid arthritis, and even rarer conditions.
Brickell Biotech was founded by Reginald L. Hardy and Andrew D. Sklawer in 2009 and is headquartered in Boulder, Colorado.
Why is the BBI stock price crashing?
The BBI stock price has fallen over 85% since its 52-week high of $1.65. Worse still, that’s a far cry from the near $20 a share it enjoyed in October 2017.
The biotech sector took a downturn in February 2021, and since then BBI stock has continued to slide.
Research and development of pharmaceuticals is a capital-intensive business, and Brickell Biotech has tapped the markets with share placings on several occasions. This raises cash at the expense of existing shareholders as it dilutes the number of shares in circulation. Indeed, BBI merged with Vical in 2019. Thus, many Vical shareholders now hold BBI shares.
In the past year, share warrants were exercised and share issuances announced. All of which has led the share price lower.
Furthermore, BBI stock faces delisting from the NASDAQ if it can’t maintain a price above $1 per share for a minimum of 10 consecutive business days by June 13, 2022.
The Company intends to continue actively monitoring the bid price for its common stock between now and June 13, 2022 and will consider available options to resolve the deficiency and regain compliance with the Rule. These options include effecting a reverse stock split, if necessary.
How does Brickell Biotech make money?
Brickell Biotech makes money from royalties relating to the sale of ECCLOCK gel in Japan. However, the company is heavily involved in R&D, so it will not make significant revenue until it successfully brings a drug to market. It has also attracted collaboration revenue via funding recognized for research and development activities in the past.
Meanwhile, BBI keeps things ticking over by raising money via share placings or debt.
Treating excessive underarm sweating
BBI’s lead drug candidate Sofpironium Bromide gel achieved positive topline results from a Phase 3 clinical trial in November. A New Drug Application (NDA) to the FDA is expected in the next few months.
Brickell’s Sofpironium Bromide gel has a 15% potency, compared with its Japanese version (branded ECCLOCK), which sells at 5% potency. This is a topical therapy for treating primary axillary hyperhidrosis, also known as excessive underarm sweating. Users apply the gel once a day, and the recent studies (Cardigan I and Cardigan II) enjoyed positive results.
BBI Financial Overview and Metrics
P/BV: 1
P/S: 57.6
Market cap: $26.4m
Brickell Biotech Q3 2021 Highlights:
Revenue: $132,000
Net loss: $13,253
BBI Stock: $2 Price Target from HC Wainwright
Analysts at Lake Street Capital Markets and HC Wainwright have both recently reiterated Buy ratings on BBI stock. Thomas Flaten at Lake Street has a target share price of $6, while Raghuram Selvaraju of HC Wainwright has a target price of $2 per share.
MACRO Outlook
Biotech stocks endured volatility in 2021, but there was no shortage of capital invested in the space as COVID-19 drove the need for clinical advancements. However, the likelihood of higher interest rates is constraining valuations. And a bearish environment leads the risk-averse investor to shy away from speculative investments.
Is BBI a good investment?
For Brickell Biotech to achieve share price momentum, investor hopes are pinned on Sofpironium Bromide gel going to market. However, if it does get approval, it then faces serious competition from pharma major Eli Lilly (NYSE: LLY), which sells a similar drug called Qbrexza that it obtained through its acquisition of Dermira.
Excessive underarm sweating is also sometimes treated with Botox.
The company has a limited budget for marketing capabilities and needs to generate adequate financing to promote any approved drugs. This is just another costly factor in an endless stream of costs the company faces.
Furthermore, as generic competition for sofpironium bromide is likely, the company could potentially be exposed to litigation.
Robert B. Brown, CEO & Director, Brickell Biotech, Inc., commented:
“I just think we're in a marketplace that hasn't found the best-in-class treatment yet... We hope between these results and the device that sofpironium bromide comes in that we can be that product. But we're still bullish on the marketplace and wanting to get there and help patients with hyperhidrosis.”
The BBI share price is currently 23 cents. So, it has under four months to maintain a share price above $1 for at least ten days. This is a tough call in the current environment. It may mean further share price dilution is likely.
There’s always the chance Brickell Biotech could be an acquisition target, but there are no guarantees investors would be rewarded for their patience.
For these reasons, Brickell Biotech remains a speculative and high-risk investment. BBI is expected to release its Q4 2021 earnings on 23 March.
If you’re interested in biotech stocks, why not read our article on Sierra Oncology.
