A Stock to Consider as Biotech Solutions Proliferate

One of the things that has struck me as the pharma industry has come up with a response to Covid-19 is just how mainstream the once niche area of biotech has become, and how dependent we have become on what are known as “large molecule” therapies. Basically, the first place we now look for solutions to medical problems is within our own bodies, rather than chemistry, for answers. The fact that biotech solutions to a novel virus were sought -- and hopefully found -- shouldn’t come as much of a surprise, given the medical fields that biotech already serves.

My wife, for example, works for a (privately owned) pharma company in the dermatology field. That is an area traditionally served primarily by creams and the like, but they too are launching a monoclonal antibody next year. It seems that there is a shift away from treating symptoms with chemical compounds and towards attacking diseases within the body.

That is true in another area of medicine that may not immediately occur to some people: ophthalmology. We tend to think of drops and surgeries to treat eye diseases, but here too, there is a movement towards biotech solutions.

One company that specializes in those therapies is Clearside Biomedical (CLSD).

When I first came across Clearside, I was reluctant to write about it or buy the stock myself, for a few reasons (Full disclosure: I intend to buy this stock within the next day or two). First and foremost, the chart is not exactly inspiring:

There are a few reasons for that. Other firms have already launched therapies in the space, giving them first to market advantage. As with all small biotech firms, cash flow at this point in the process has been a worry. Trials are being conducted and preparations made for a product launch, and all of that costs money at a time when sales are basically zero.

Companies like Clearside often receive advance payments from licensing partners when they hit development milestones, but it is often uncertain whether they will enable the company to last through the later stages of development without selling the family jewels to stay afloat.

The first of those issues don’t worry me in this case. First to market can be a plus, but it can also be a negative. The first product to market uncovers potential problems and patient resistance to new treatments, and has to work to overcome this, often making subsequent entrants easier and cheaper to launch. In addition, CLSD’s lead candidate right now, CLS-AX, targets wet AMD (Age-related Macular Degeneration), a market that has plenty of room for multiple therapies, because AMD affects over 11 million people in America right now. That patient population is predicted to double by 2050 as the U.S. population continues to skew older.

Cash burn is a more worrying problem, but recent news here allays some of the fears about that for CLSD. Their Q3 results released on Thursday showed a lower loss than expected, and most analysts now believe that the company has enough cash and projected cash flow to last until around Q3 2021. That should give time for a product launch, assuming good trial results, and the better than expected numbers this quarter are a good sign that the company’s management has a handle on the potential problem.

Obviously, a stock like CLSD is not for everybody. It is a high risk/high reward play, but if you are able to bear that degree of risk, it looks like a decent way to play the march towards the ubiquity of biotech in general.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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