Cardiff Oncology (NASDAQ:CRDF) is an oncology specialist that had a fantastic year in 2020. The market is excited about the biotech's lead molecule, onvansertib, because it might work to defeat cancer caused by the KRAS mutation, a significant market opportunity. Healthcare bureau chief Corinne Cardina and Motley Fool contributor Taylor Carmichael discuss whether Cardiff is a buy for investors. This Fool Live episode was recorded on Jan. 15, 2021.

  

Corinne Cardina: Cardiff Oncology. In 2017, it licensed its lead candidate from a private company for just two million dollars after that candidate flopped a phase 1 study. In September, it reported better than expected interim results for advanced stage colon cancer patients. Those patients had a particular mutation called KRAS, meaning it's more aggressive than usual. Investors are looking at this experimental drug as a potential blockbuster. Stock was up 1,350% in 2020. The market cap is still only $625 million. Taylor, what is your green flag and then your red flag for Cardiff Oncology?

Taylor Carmichael: Well, the green flag, I guess, for Cardiff is that they're going after KRAS mutation, which is a very big field, and that mutation causes cancer that's basically undruggable. The market is very excited. That's why Cardiff has jumped up so much because they are doing this one test, they only have one drug, but they're doing this, they're looking at it and using it with other drugs. It's not a monotherapy. Used in combination with other drugs. They are looking at it in KRAS.

Now, KRAS mutation has been huge. If you look at Mirati, they've gone up to an $11 billion market cap because they specialize in KRAS. Amgen also is in this area. Demand is huge for this. So that would be the green flag, is that where they're going after is the high demand area and if they can pull it off, the sky is the limit. A couple of downsides, one, they only have one drug which they acquired from another company. it's cancer, so in this particular trial, there are a fair number of adverse events: anemia, fatigue, low levels of blood platelets.

In one study, there were 24 people tested with the drug over a six-week period; only 14 people completed the study. So that's a lot of dropouts. That's 10 people dropping out because of adverse events or the cancer got worse. That's a negative; cancer's tough.

It's just really hard and a lot of brilliant minds have been trying to solve cancer for a long, long time. It's not a lock, and like Trillium, this is very early. They are a little more advanced than Trillium. They're in phase 2, and they're going to have data readouts this year in phase 2 and phase 1. They are farther down the road than Trillium, but you'll notice their market cap is not as high, and I take that to mean the market is not quite as excited about Cardiff probably because they only have the one drug. Most exciting is that they're going after KRAS, but I'm not convinced that this is a world-beater drug yet, and it's very early. So I would probably not buy the stock, but I would keep it on a watch list, and I would keep Trillium on a watch list too, and these are very interesting companies.

Cardina: Financially, do you think Cardiff, can it stay solvent, or does it need a partner at some point to get to regulatory submission and potential commercialization?

Carmichael: Yeah, that's a good question. They don't have a lot of cash. They started off with $10 million and they burned $11 million in cash. Again, started off as a micro-cap, when they started off, they've had a huge run-up in the stock, and they sold stock earlier in the year, or warrants, raised some money. So now they have more money than they started off the year with. Overall, they have $36 million in cash now. They raised money in the year, so effectively, they didn't burn anything. They've got more money than they had before. But the downside, they got it by selling stock, so investors should be a little worried about dilution, about them having to do that again, coming back to the market for more money, selling more stock, that's always bad. You like your companies to buy your stock back, you don't like them to sell stock. So when they sell stock, your stock's going down. Unlike Trillium, they don't have a big pharma partner, they don't have a collaboration deal yet. To my way of thinking, a watch list stock, I don't think I would be ready to invest here yet, it's still very early.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.