What happened
Shares of the small-cap biotech Heron Therapeutics (HRTX -1.13%) are down by a noteworthy 19.2% as of 2:48 p.m. ET Tuesday afternoon. The drugmaker's shares are cratering today in response to its disappointing 2021 fourth-quarter results.
What's the specific culprit behind this hefty sell-off? The lack of commercial momentum for Heron's non-opioid painkiller Zynrelef appears to be the biggest concern for shareholders today. Even though the drug was launched last July, it failed to bring in even $1 million in net revenue for the company in Q4 2021. The drug's unfavorable initial label simply hasn't allowed it to become a viable growth driver as of yet.
Image source: Getty Images.
So what
Heron has been one of the most heavily shorted stocks on the Nasdaq stock exchange for quite a while now. Short sellers have clearly been betting against Zynrelef's commercial launch due to the restrictive nature of its initial label. And so far, the bears have been spot on in their assessment. The good news for bulls is that Heron did successfully get a broad label expansion for the pain med late last year. So Zynrelef's sales ought to pick up in a big way from here on out.
Now what
Is Heron's stock a buy on this latest weakness? With Zynrelef expected to see a parabolic rise in sales over the course of 2022, this beaten-down biotech stock comes off as a downright bargain at these levels. At this point, the company is probably in "prove it" mode with investors after so many regulatory and commercial setbacks. In other words, Heron's stock may not rebound until it reports 2022 Q1 earnings later this year.
