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Is the SCYNEXIS stock sell off creating a value opportunity?

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Pharma stocks can be volatile, especially in the sub-$100m market cap space. Shares in fungal treatments specialist SCYNEXIS [NASDAQ:SCYX] fell off a cliff in September, dropping from $3.45 to hit $1.71 at time of writing. What caused the sell off, and does SCYNEXIS now represent a buying opportunity, or should investors be looking at close peer Aquesitive Therapeutics [NASDAQ:AQST] instead?

The big sell off first: this seems to have occurred when SCYNEXIS issued a voluntary nationwide recall of two lots of its Brexafemme tablets, available at the consumer level, due to potential cross-contamination with a non-bacterial drug substance in the citrate used to manufacture the tablets. The company thought the problem had the potential to create hypersensitivity reactions in patients.

SCYNEXIS had to move to recall the product down to the consumer level. This is never good news for drug companies, even when they are moving with the best of intentions. It led many investors to hit the sell button, but currently the company is still sitting on some solid fundamentals, and there is a case to argue that $1.71 may be too cheap. The PE ratio is down at 1.8X with an EBITDA of 45.82%.


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