Monday, December 28, 2015

BioPharmX Losing Even More Money in 2015

BioPharmX (ticker BPMX) is another small pharmaceutical company with big plans to shake up drug delivery in dermatology and women's health. Plans are one thing, operations are another. Talented management teams are supposed to translate strategic plans into operational success.

The company's management backgrounds make me wonder whether the right people are in the right positions. The current CEO and president both have very diverse backgrounds helping other tech-related companies, but growing a young drug company demands years of drug-specific focus. Their SVP for marketing has worked in plenty of sectors except drugs. I am used to seeing such oddly diverse backgrounds in small-cap mining companies that have trouble developing a viable project, but it is disappointing to see such a mix in a drug company.

Their primary products, according to the company's website, are a topical antibiotic for acne and an iodine tablet for treating fibrocystic breast condition. Knowing the market opportunity should matter for investors. IBISWorld's market research report from February 2015 puts the size of the acne treatment market at $644M, with up to 50M Americans afflicted. GMR Data puts the market size higher at $3.1B for the same population. Divide the market size by the number of patients to get an average annual spend per person. MPR lists the leading anti-acne formulations and their doses. The many treatments available make for a saturated market. Fibrocystic breast condition is a mildly discomforting condition, according to searches with WebMD and the Mayo Clinic. The condition is so inconsequential it typically doesn't even require treatment unless a cyst becomes a marker for cancer.

BioPharmX's BPX01 anti-acne treatment is still in its clinical stage, so it's impossible to know its retail price point in a market crowded with generics. The company's BPX03 for breast pain must compete directly with very cheap OTC pain relievers. New drugs treating common symptoms already covered by cheap treatments are usually redundant unless they offer massive improvements.

Read the 10-Q dated December 15, 2015. BioPharmX had US$2.2M in cash on hand on October 31 and a net loss of -$11M for the prior nine months. The company must raise significant new capital frequently just to survive with that kind of burn rate, so investors can expect continued dilution. The stock market reacted to the company's December 14 "breakthrough" announcement, and then drove the share price back down in the weeks since then. The press release describing the BPX01 research results doesn't reveal much useful information.

BioPharmX had a very unprofitable 2015 even after ramping up SGA expenses. They also lost money in the prior two years. A drug company whose ability to deliver a quality product is largely unknown must rely on some compelling "story" of unmet market needs and past management successes. The BioPharmX story needs a better second chapter.

Full disclosure: No position in BPMX at this time.