Welcome to the Small-Cap Biotech Mailbag!

Today we are going to do something different. I am going to provide some answers to some common questions I have received lately around some of the small- mid-cap biotech stocks I regularly cover on these pages. Kind of like a Small-Cap Friday Mailbag session. Here goes: 1. Can Biodelivery Sciences rebound in 2017? Well, the pieces are certainly in place around its two primary compounds, Bunavail and Belbuca, and it's in a position to have a much better year in 2017 than in 2016. The company signed ahalf-dozen contracts with insurance providers in the back half of 2016. This greatly increased the network coverage for Bunavail reimbursement, which should goose sales starting in this year's first quarter. The company also got back Belbuca as a wholly owned drug from previous marketing and distribution partner Endo International , which got out of the pain management space. Belbuca sales will take an initial hit as Biodelivery integrates the compound into its existing sales force and hires some additional representatives. However, the company also will receive all the revenues from Belbuca sales instead of just royalties. Recently, management said based on these two events it expects the company to be cash flow positive by the end of the quarter instead of the end of 2017, which was its previous guidance. 2. Do you still expect Acadia Pharmaceuticals to be bought out? The stock has had a monster run over the past year and has doubled since it was put in the model-20 stock portfolio of the Biotech Forum and I started talking about it here on Real Money Pro in the first half of 2016. I would not be chasing it here, but still think a buyout is the most likely outcome for the company. One reason is because of the attractiveness of its compound Nuplazid, which is approved for the psychosis found in 40% of Parkinson's patients but potentially could be used to treat the same symptoms in the Alzheimer's and schizophrenic populations. In addition, the Baker Bros. own slightly more than 20% of this concern, so a purchase makes logical sense. The stock after a huge run is selling just under $40 a share. I have been modeling a buyout price of $45 to $50 a share if only one interested suitor makes a play. If multiple bidders come forward, I could see $55 to $60 a share in a bidding war. 3. Should I buy this week's dip in Aratana Therapeutics ? In a word, yes. The stock has given up a fifth of its market value since Monday after the company announced that its drug Entyce will not roll out until fourth quarter. It originally was expected to be launched this quarter. The company is in process of changing to a different manufacturing vendor; this has nothing to do with the drug itself. More importantly, it will not impact the other two drugs, Galliprant and Nocita, that were approved last year and are in the very early innings of commercialization. Based on anecdotal evidence from a couple veterinarians on the Daily Diary this week, I am more convinced than ever that both products will find nice niches in the veterinary drug space. In addition, the company has about $100 million in cash on hand and a big collaboration deal with Elanco to market and distribute Galliprant. At most, the setback with Entyce might mean $10 million in sales are delayed in 2017. This hardly justifies a $60 million drop in Aratana's market capitalization this week.

Welcome to the Small-Cap Biotech Mailbag!

We answer recent reader questions about three of the biotech stocks we regularly cover.

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