CSBR Stock Decline: Regulatory and Business Model Shifts
In his most recent PodClip, Maj discusses the recent sharp drop in $CSBR, from its 52-week high of $11.99 to it current price of $5.80, possibly attributing the decline to two main factors: Investor overreaction to the potential impact of the FDA’s initiative (FDA 2.0) promoting alternatives to animal testing in biotech research, and the absence of additional data licensing contracts, following a major $5 million contract.
The company’s legacy business relies heavily on mice testing for cancer research.
What some investors may not realize is that this initiative was originally passed in December 2022, while some framework around the initiative was put in place in April 2024, which may be bringing some current attention to the initiative.
There is also a 3 to 5 year phase in process of this initiative and to be clear, the initiative is not regulating that biotech companies cannot test on animals, it’s just encouraging them to look at more modern testing tools and processes, such as using AI.
Actually, Maj discusses how the company's 40 years of rich data set could potentially benefit from the 2.0 initiative as the use of AI is being promoted in biotechnology. This could possibly accelerate contract wins in the company's data licensing business and why pharma companies have been expressing interest in acquiring the company’s data.
However, there are caveats that Maj discusses, regarding this new revenue stream.
In the end, the CSBR play has always been on the new data licensing revenue stream and its ability to secure additional contracts. It was never about the legacy business, which Maj is not a big fan of.
Regardless, the stock faces volatility and uncertainty, especially with the lack of new contracts.
Maj suggests that investors should focus on the long-term opportunity of the data licensing model, adapting their portfolio positions based on evolving potential clarity from CSBR’s management in the upcoming earnings call around securing additional contracts, and the near term impact, if any, of FDA 2.0.
---
