Cempra (CEMP) & Threshold Pharmaceuticals (MTEM) Financial Analysis

Cempra (NASDAQ: CEMP) and Threshold Pharmaceuticals (NASDAQ:MTEM) are both small-cap medical companies, but which is the superior business? We will contrast the two companies based on the strength of their valuation, analyst recommendations, earnings, risk, institutional ownership, profitability and dividends.

Institutional and Insider Ownership

49.8% of Cempra shares are held by institutional investors. 17.8% of Cempra shares are held by company insiders. Comparatively, 13.0% of Threshold Pharmaceuticals shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Profitability

This table compares Cempra and Threshold Pharmaceuticals’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Cempra -560.40% -53.99% -42.66%
Threshold Pharmaceuticals N/A -77.61% -61.41%

Volatility & Risk

Cempra has a beta of 1.12, meaning that its share price is 12% more volatile than the S&P 500. Comparatively, Threshold Pharmaceuticals has a beta of 3.34, meaning that its share price is 234% more volatile than the S&P 500.

Earnings and Valuation

This table compares Cempra and Threshold Pharmaceuticals’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Cempra $17.65 million 9.52 -$90.86 million ($1.89) -1.69
Threshold Pharmaceuticals N/A N/A N/A ($1.98) -4.97

Threshold Pharmaceuticals has higher revenue, but lower earnings than Cempra. Threshold Pharmaceuticals is trading at a lower price-to-earnings ratio than Cempra, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a summary of current ratings and recommmendations for Cempra and Threshold Pharmaceuticals, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Cempra 3 10 2 0 1.93
Threshold Pharmaceuticals 0 1 1 0 2.50

Cempra presently has a consensus target price of $10.90, suggesting a potential upside of 240.50%. Threshold Pharmaceuticals has a consensus target price of $5.20, suggesting a potential downside of 47.15%. Given Cempra’s higher possible upside, equities research analysts clearly believe Cempra is more favorable than Threshold Pharmaceuticals.

Summary

Cempra beats Threshold Pharmaceuticals on 8 of the 11 factors compared between the two stocks.

About Cempra

Cempra, Inc. is a clinical-stage pharmaceutical company. The Company focuses on developing differentiated antibiotics for the acute care and community settings to meet medical needs in the treatment of bacterial infectious diseases. Its product, solithromycin (CEM-101), which is a macrolide and fluoroketolide, is being developed in oral capsules, intravenous (IV) and suspension formulations for the treatment of community-acquired bacterial pneumonia (CABP). Solithromycin has therapeutic potential and activity to target pathogenic bacteria. It has completed two pivotal Phase III trials for solithromycin to treat CABP, as of December 31, 2016. Its Fusidic acid is an antibiotic and the Company is exploring its use for the long-term oral treatment for refractory bone and joint infections (BJI), including prosthetic joint infections, which are caused by staphylococci, including S. aureus, methicillin-resistant S. aureus, coagulase negative staphylococci and other gram-positive bacteria.

About Threshold Pharmaceuticals

Molecular Templates, Inc., formerly Threshold Pharmaceuticals, Inc., is a clinical-stage biotechnology company. The Company is engaged in the discovery and development of therapeutic and diagnostic agents that selectively target tumor cells for the treatment of patients living with cancer. It is developing two therapeutic product candidates based on hypoxia-activated prodrug technology: evofosfamide and tarloxotinib. Evofosfamide is designed as a prodrug that is activated under the extreme hypoxic conditions commonly found in tumors, but not in healthy tissues. Tarloxotinib is under investigation in two Phase II proof-of-concept trials: one for the treatment of patients with mutant EGFR-positive, T790M-negative advanced NSCLC progressing on an EGFR TKI, and the other for patients with recurrent or metastatic squamous cell carcinomas of the head and neck. [18F]-HX4 is an investigational Positron Emission Tomography imaging agent for hypoxia to identify.

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