2 Falling Knives to Catch

Athenex and Bellerophon Therapeutics have declined more than 59% over the past 52 weeks

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Alberto Abaterusso
Jul 06, 2021

Summary

  • Sell-side analysts issued a moderate buy rating for Athenex and a buy rating for Bellerophon Therapeutics.
  • Investors seeking success amid falling knives should be aware that a strong decline in the share price could be a sign of permanent issues.
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Wall Street recommends buying shares of Athenex Inc. (

ATNX, Financial) and Bellerophon Therapeutics Inc. (BLPH, Financial). This sounds quite surprising as these two equities have performed poorly over the past 52 weeks through July 2. With positive recommendations despite the share price tumble, these two stocks have earned the status of "falling knives."

Investors try to catch these stocks near their lowest levels because, in doing so, they hope to gain the highest return possible following an expected rebound in the share price. However, investors must be cautious when investing in falling knives as they carry remarkable risk. The strong decline in the share price could be a sign of permanent issues.

Athenex

Based in Buffalo, New York, Athenex is a biotechnology developer of various cancer treatments, including breast cancer, gastric, pancreatic and colorectal cancer, glioblastoma, lung, ovarian and cervical cancer, liposarcoma, skin cancers as well as solid and liquid tumors.

Shares of Athenex were trading around $4.56 at close on Friday following a 65.74% decline over the past 52 weeks.

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The stock has a market capitalization of approximately $426.42 million, a 52-week range of $3.66 to $15.24 and a 14-day relative strength index of 44, which indicates the stock is still far from oversold levels despite the sharp share price decline.

The balance sheet is not in good shape either. The Piotroski F-Score of 2 out of 9 and the Altman Z-Score of -1.94 suggest the company is in the distress zone and could be in danger of going bankrupt within two years.

Regarding profitability, financial ratios such as the operating and net margins, as well as the returns on total assets, equity and capital are all negative as the company has not yet achieved the desired level of sales despite its ongoing efforts to broaden its portfolio. In the first quarter of 2021, the company hit $41 million in total revenue, down nearly 13% year over year, for a net loss of 27 cents per common share. The company is working hard to obtain the necessary approval from regulators concerning a treatment for metastatic breast cancer patients. In case of a positive outcome, the share price could receive a significant boost.

On Wall Street, the stock has a median recommendation rating of moderate buy and an average price target of about $8 per share.

Bellerophon Therapeutics

Based in Warren Township, New Jersey, Bellerophon Therapeutics is a clinical-stage developer of therapeutic treatments for pulmonary hypertension alone or associated with other medical conditions. These include fibrotic interstitial lung disease, chronic obstructive pulmonary disease, sarcoidosis, pulmonary edema from high altitude sickness and Covid-19.

Shares of Bellerophon Therapeutics were trading around $4.62 at close on Friday following a 66.20% decline over the past 52 weeks.

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The market capitalization hovers around $43.92 million, the 52-week range is $3.79 to $14.09 and the 14-day relative strength index yields 47, with the last indicator suggesting the stock is far from oversold levels although its share price fell heavily over the observed period.

With regard to its financial strength, the balance sheet does not seem weak as it holds $40 million in cash on hand and equivalents and is charged with debt for less than $2 million. However, a Piotroski F-Score of 3 out of 9 is low and indicates that the business operation is still poor, meaning that the financial situation currently diverges from a stable company type.

From a profitability standpoint, the ROE, ROA and ROC ratios are all negative since the company is not generating any sales yet.

Bellerophon continues to develop its pipeline of therapeutic treatments. Results from a study evaluating the company’s inhaled nitric oxide-based therapy in patients with sarcoidosis are expected the end of this year, which could trigger a share price rebound.

On Wall Street, the stock has a median recommendation rating of buy and an average price target of about $23.7 per share.

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Disclosures

I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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