PhaseRx Inc (NASDAQ:PZRX) Is A Hidden Biotech Gem

Today, we need to talk about PhaseRx Inc (NASDAQ:PZRX), the biopharmaceutical company, since its PRX-ASL, drug candidate for the treatment of argininosuccinate lyase deficiency (ASLD), has recently received orphan drug designation by the FDA. PhaseRx LogoThe market reaction was quite bullish. More than 6 million shares changed hands on the announcement date. On top of it, from trading at $0.75 per share, the share price went to touch the level of $1.50 per share in only one session. Have a look at the share price action before we provide more details: 1 month chart for PZRXBusinessPZRX, founded in 2006 and headquartered in Seattle, develops treatments of inherited enzyme deficiencies in the liver using intracellular enzyme replacement therapy, or i-ERT. According to the last 10-K, the company expects to obtain clinical safety and efficacy data in 2018.How big is the market?Replacement therapies do not seem to exist for intracellular enzyme deficiencies, currently being marketed for inherited enzyme deficiencies in the liver. Additionally, the market size is $4 billion worldwide, which is the market for conventional enzyme replacement therapy or ERT, which includes drugs, such as Cerezyme. We appreciate this fact, as it seems that the company is really innovating.What's the level of development?The company has preclinical proofs of concept in two mouse models. The company believes that it could be approved by the FDA for the demonstration of efficacy in human clinical trials.The following is a table showing the programs under development along with the level of development: Development PipelineRecent DevelopmentsOn August 22, 2017, the company received a letter from NASDAQ Stock Market exchange, wherein it was noted that the company was not in compliance with certain equity requirements. First of all, the equity reported, $2.2 million, was below the required minimum of $2.5 million.Additionally, the company needs to have a market capitalization above $35 million or net income of $500,000 from continuing operations, which is not being adhered to. The company will need to report a plan in the next 45 calendar days to solve the situation.The letter is not a matter of great concern for our team, as many other companies have also received it. Additionally, in our opinion, the company has many options. Several corporate actions are available to try to regain compliance, such as share buybacks could increase the share price. Thus, we will be alert on how the company addresses this problem. Opportunities may arise.On September 20, 2017, the company released an interesting announcement. Its second drug candidate, PRX-ASL, for the treatment of argininosuccinate lyase deficiency received the orphan drug designation from the FDA. The press release explained the disease with the following terms:

"ASLD is a rare liver disorder caused by an inherited single-gene deficiency that results in hyperammonemia (elevated ammonia in the blood), and can lead to irreversible neurological impairment, coma and death." Source

As we have seen in other cases, the orphan drug designation is a key milestone for further research and development efforts. The US Government gives this distinction to drugs that affect fewer than 200,000 people, which helps companies with tax incentives, seven years of market exclusivity, and financial research subsidies.Financials and Market ParticipantsWe were glad to find in the last quarterly earnings release, which was received on August 10, 2017, that the company holds almost $5 million cash in hand, and $9 million in total assets. Thus, we believe that PZRX will be able to continue its R&D operations for a long time. Have a look at it:Current assets (in Thousands) June 30, 2017 December 31, 2016Cash and cash equivalents $4,941 $9,983Marketable securities3,4215,496Prepaids and other current assets615698Total current assets8,97716,177Property and equipment, net229271Total assets $ 9,206 $ 16,448SourceAs compared to the total assets, the total liabilities are less significant. Have a look:Current liabilities (in Thousands) June 30, 2017 December 31, 2016Accounts payable$493$515Accrued liabilities548884Accrued interest4949Current portion of term loan payable1,747576Total current liabilities2,8372,024Term loan payable, net of debt discount and current portion4,1405,127Total liabilities 6,977 7,151SourceFurthermore, we also appreciated that several market participants disclosed big stakes in the company:HolderSharesDate Reported% OutValueVanguard Group, Inc. (The)142,182Jun 29, 20171.22%133,651Regions Financial Corporation63,845Jun 29, 20170.55%60,014Virtu KCG Holdings LLC61,326Jun 29, 20170.52%57,646SourceConclusionCurrently trading with a market cap of $11 million, PZRX is an exciting story among small caps. With a lot of cash and positive net asset value, the company seems to have a lot of gasoline to run its business for a long time. Additionally, other market participants performed due diligence and purchased shares.Catalysts?The company may deliver some data soon, as the orphan drug designation for the company's lead candidate PRX-OTC was received a long time ago; November 28, 2016. Nothing was reported regarding the R&D work on this project, thus we expect the first data soon. Be alert, as if the new information is good, the share price may run up the charts.To sum up, this stock seems to be interesting for those looking for hidden gems in the micro cap space. Follow up this name and focus on the company's announcements, as the news flow is what's really driving the stock price.We will be updating our subscribers as soon as we know more. For the latest updates on PZRX, sign up below!Image courtesy of phssthpak via FlickrDisclosure: We have no position in PZRX and have not been compensated for this article.