We recently compiled a list of the 10 Best Small-Cap Biotech Stocks with Massive Potential According to Hedge Funds. In this article, we are going to take a look at where Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX) stands against the other small-cap biotech stocks.
Revolutionizing Healthcare and Economy: The Rapid Growth of Biotechnology
The biotechnology sector is expanding quickly due to rising demand for novel therapies, technological advances, and government assistance. Advances in fields like gene editing, sequencing, personalized medicine, and artificial intelligence are making new techniques possible, while the aging population and growing healthcare demands are driving a robust market for new treatments. According to a report by McKinsey & Company, venture capital firms made approximately $52 billion in global investments in therapeutic-focused biotech companies between 2019 and 2021. Two-thirds of this sum was given to platform-tech start-up companies.
Despite its growth, many biotech companies have faced challenges in turbulent markets, taking drastic measures such as cutting programs and implementing significant layoffs to conserve cash. While recent rate cuts could encourage the revival of scientific projects, analysts like Jared Holz note the difficulty of gauging their impact. Holz also highlighted a shift in market dynamics, observing that biotech’s performance increasingly correlates with small-cap equities. If small-cap stocks trade well, biotech is likely to follow, though stagnation could occur if momentum fades. Notably, the idea of interest rates predicting biotech success is relatively new, emerging only after the pandemic, which reshaped the industry by driving substantial investment into therapeutic-focused companies.
With innovative treatments, biotech businesses are revolutionizing healthcare by tackling important unmet medical needs. Establishing the National Bioeconomy Board as a component of Biden’s Investing in America agenda is a significant breakthrough. It seeks to maximize biotechnology’s economic potential in the United States.
Furthermore, policy suggestions to expedite the approval process for biotechnology goods are being developed by the National Security Commission on Emerging Biotechnology. More academics will be able to use biotechnology for agricultural purposes if entry obstacles are reduced, which will benefit American farmers and increase food security. It is anticipated that these initiatives will open up new markets.
Pharmaceuticals as Defensive Investments and the 2024 Healthcare Market Outlook
This year (2024) started strongly for the biotechnology sector due to a rise in mergers and acquisitions as well as anticipations of falling interest rates. Therefore, estimates suggest that the worldwide biotechnology market might increase at a compound annual growth rate (CAGR) of around 14% from 2024 to 2033, reaching an astonishing $5.7 trillion. The market for agricultural biotechnology is also expected to develop at a 7.9% compound annual growth rate (CAGR) and reach $232 billion by 2032.
But even with the market’s potential, investing in biotech companies still carries a number of serious dangers. Bankruptcy may result from failing to satisfy clinical trial endpoints or obtain adequate finance before a product launch. In the biotech industry, where drug development usually takes more than ten years and has an estimated failure rate of about 90%, the danger of failure is very substantial. Hence, biotech stocks are often considered “high-risk, high-reward” investments due to their upside potential coupled with significant risks
Our Methodology
In our methodology, we identified the top small-cap biotech stocks with significant growth potential, ranked according to their total hedge fund holdings as of Q2 2024. Our selection process began by filtering companies with a small market capitalization. Next, we reviewed analyst recommendations, focusing on stocks with strong bullish sentiment and high institutional ownership. Finally, we ranked these companies based on the number of hedge funds holding their shares as of Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A scientist in a laboratory testing a monoclonal antibody for the treatment of cancer.
Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX)
Number of Hedge Fund Holdings: 49
Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX) is a clinical-stage biopharmaceutical company focused on developing innovative cancer therapies. The company creates novel drugs targeting specific molecular pathways involved in cancer progression. Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX)’s primary focus is on two key drug candidates: revumenib for acute leukemias and axatilimab for chronic graft-versus-host disease (cGVHD).
The company’s Revumenib, currently under Priority Review by the FDA for relapsed/refractory KMT2Ar acute leukemia, has a PDUFA action date of December 26, 2024. This approval could significantly impact the market for acute leukemias. Axatilimab is also under Priority Review for refractory chronic graft-versus-host disease (cGVHD), with a PDUFA action date of August 28, 2024. Approval for this indication would address a critical unmet need in transplant patients. These potential approvals could propel Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX) from a clinical-stage company to a commercial entity with multiple revenue streams.
Financially, the corporation reported a net loss of $84.1 million for Q3 2024 which was driven by increased R&D and SG&A expenses due to clinical trials and commercial readiness. Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX) expects total operating expenses for 2024 to be between $365 and $370 million, with R&D expenses projected at $245 to $250 million. The company also entered into a $350 million royalty financing agreement with Royalty Pharma to fund operations through profitability based on U.S. sales of Niktimvo. As of September 30, 2024, Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX) had cash and investments totaling $399.6 million, which, along with other funding sources, is expected to support operations until profitability is reached.
As of Q3 2024, 49 hedge funds, tracked by Insider Monkey, held stakes in the company with Kynam Capital being the largest stakeholder with shares worth $112.4 million. Based on recent forecasts from 11 analysts, the average 12-month price target for Syndax Pharmaceuticals is $34.56, with a high of $45.00 and a low of $23.00, representing a 92.00% increase from the current price of $18.00.
Overall SNDX ranks 1st on our list of the best small-cap biotech stocks with massive potential according to hedge funds. While we acknowledge the potential of SNDX as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than SNDX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.