BioDelivery Is About to Start Delivering

Yesterday we talked about the stop/start rebound in the biotech sector since it made bear market lows back in late September. So far, this has mainly benefited the large-cap growth stocks within the sector, but should eventually trigger a rally in the small and mid-cap part of the sector over time. Given this, an interesting and promising small-cap biopharma stock is our small cap focus stock of the week. BioDelivery Sciences International (BDSI) is a specialty pharmaceutical company based in Raleigh, North Carolina. The company engages in the development and commercialization of pharmaceutical products, principally in the areas of pain management and addiction. BioDelivery is building a better delivery system, using its technology to produce film strips that melt in your mouth for primarily existing compounds. In this way, it reminds me very much of Eagle Pharmaceuticals (EGRX), which was a massive winner for the Best Ideas list earlier this year, with an approximately 450% return during its stint there. The company has a market capitalization of approximately $300 million, and enough cash on hand to fund itself through at least mid-2017. BioDelivery has one product on the market and one more key compound that was just approved. Its first product is BUNAVAIL, which is abuprenorphine and naloxone buccal film for the treatment of opioid dependence. It will compete directly with Suboxone sublingual film. Buprenorphine is used to treat a variety of pain conditions. In 2014, sales of Suboxone sublingual film totaled approximately $1.3 billion in the U.S. BUNAVAIL has gotten out to a slow rollout, but it is starting to get some traction. The more exciting product for BioDelivery is BELBUCA, which was just approved by the FDA. This drug is a mu-opioid receptor partial agonist and a potent analgesic, with a long duration of action for the treatment of chronic pain. More importantly, the company has a deep-pocketed development and distribution partner for BELBUCA in Endo International (ENDP), who is responsible for all further development costs, marketing and distribution for the drug. FDA approval late in October triggered a $50 million milestone payment to BioDelivery, which can also receive over $50 million in additional sales milestones as well as royalties in the mid to high teens on the sales of BELBUCA. Stern Agee recently came out with a projection that BELBUCA could eventually see $500 million in peak annual sales. The FDA has also approved ONSOLIS. This is an opioid agonist indicated for the management of breakthrough pain in cancer patients 18 years of age and older, who are already receiving and who are tolerant to opioid therapy for their underlying persistent cancer pain. With a market capitalization right at $300 million, the prospects for BELBUCA if they come anywhere near Stern Agee's projections are worth more than the market is valuing the entire company right now. In addition, the company has a couple of other approved products, and more importantly underlying technology, to continue to build out and develop a potentially lucrative pipeline. The stock traded for over $15.00 a share earlier this year, but now it can be had for under $6.00 a share. The slow rollout of BUNAVAIL has been a headwind to the stock, but now that BELBUCA is approved and a $50 million milestone check is in transit, better days should be ahead for the stock and its shareholders. The median price target by the seven analysts that cover the company is $14.00 a share. I recently purchased a small stake in BioDelivery Sciences and look forward to it delivering on its promise.

BioDelivery Is About to Start Delivering

The company cleared an important hurdle last month.

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