Here's What The Hoth Acquisition Means For Spherix Inc (NASDAQ:SPEX)

Spherix Inc (NASDAQ:SPEX) has been a real runner so far this week. The company closed out the session on Wednesday at $1.91 share and, premarket on Thursday, has gained an extra $0.59 to set up an open in and around $2.50 apiece. Based on its start of the week pricing of less than $1, shareholders are looking at gains of more than 150% in a matter of days.The driving force behind the action is the company's recent announcement that it has acquired a controlling interest in a privately held biotechnology entity called Holt. Details remain relatively sparse right now as to both the terms of the deal and its implications for Spherix going forward.In light of this sparsity, here's an attempt to inject some clarity into the situation with the goal of assessing whether there's further upside available on Spherix's current price.So, the initial announcement came back on June 20, when the company announced that it had reached definitive terms to acquire the above-mentioned controlling interest in Hoth Therapeutics. At the time, we learned that Hoth's lead development program was rooted in a platform called BioLexa, which reportedly is set up to advance dermatology treatments to market.The primary indication of the BioLexa platform right now is eczema.Eczema is a big market. Analysts estimate that the global eczema drug market is currently worth about $4 billion in sales, mostly comprised of topical steroids. These sort of topical steroid treatments are effective in the sense that they help overcome the eczema, but they are notoriously rough on patients from a tolerability perspective. Side effects range from thinning of the skin (also called atrophy) to stretch marks and darkening, as well as various forms of inflammation and the associated implications of such. A large portion of the patient population in this indication would rather deal with the condition than take steroids to relieve symptoms, purely based on the side effects caused by the latter.According to the limited information available surrounding the BioLexa platform, Hoth has been able to create an eczema drug that is nonsteroidal, meaning it should – theoretically – be able to treat the underlying condition without inducing the tolerability issues associated with steroids.As per the latest acquisition, then, Spherix is set to benefit from the advancing of this platform along the clinical development pathway and when (if) the drug reaches the market.So what are the chances of success?Early data from studies conducted at the University of Miami Miller School of Medicine, Department of Dermatology, showed that Biolexa inhibited the growth of the staphylococcus bacteria associated with eczema.Inhibition of Staphylococcus bacteria is a relatively well-known mechanism of action in this sort of dermatology indication, so from a proof of concept perspective, that looks relatively promising. With that said, preclinical data is far from confirmatory of a drug's success as and when it moves into the clinic, and in this uncertainty lies the primary risk associated with exposure to Spherix based purely on the latest development.Mitigating that risk somewhat is the company's legacy operation, rooted in the monetization of certain biotechnology and healthcare related intellectual property. There are a number of ongoing cases associated with that side of Spherix right now and, as a long-term value base, these give shareholders something to rest on while the BioLexa program matures.From a financial perspective, management reported as per this letter to shareholders that the monetary investment in Hoth is fixed and that it does not anticipate additional funding from Spherix to develop the compound. This serves to limit any potential near-term dilutive risk; at least to a degree. Chances are we will see some degree of issue to fund the acquisition ahead of closing, but we'll know more about that over the coming few weeks.If we do see a raise, the inevitable dip it brings about could be a decent opportunity to pick up shares at a discount ahead of a longer term rebalancing and eventual revaluation.We will be updating our subscribers as soon as we know more. For the latest updates on SPEX, sign up below!Image courtesy of Dion Gillard via FlickrDisclosure: We have no position in SPEX and have not been compensated for this article.