Cerecor Inc (NASDAQ:CERC) is running again. The company traded for a little over $0.50 a share during the middle of August but by the close of last week had risen to nearly $0.90 a share – an 80% uptick in a little over a week. As we have pointed out on a number of occasions, however, this sort of action is likely the start of a longer-term revaluation for Cerecor.Here is why.Cerecor is a development stage biotechnology company that traded as high as five dollars a share back at the end of last year but that collapsed on the failure of its lead development asset, a drug called CERC-501, which was at the time under investigation as a potential therapy to aid smoking cessation. Cerecor's second primary lead, a drug called CERC-301, also failed a couple of clinical trials, both rooted in major depressive disorder (MDD), which contributed to the collapse. CERC Daily ChartHeading into 2017, then, Cerecor didn't like a great stock to hold. Two failed lead assets and a quickly diminishing cash balance meant the stock was a punt at best and share price across the period reflected this.Over the last few months, however, Cerecor has regrouped and refocused its pipeline on a different disease group. Specifically, the company is targeting orphan neurological disorders (things like rare forms of epilepsy, etc.) and intends to kick off a number of programs that could bring with them various catalysts over the coming 12 to 24 months. It has also, as per the most recent update, just offloaded the above-mentioned failed CERC-501 asset by way of a sale to Johnson & Johnson (NYSE:JNJ)'s Janssen arm. The deal saw the latter pick up the asset for $25 million, with $21.25 million paid in cash upon closing of the deal and $3.75 million placed into a 12-month escrow account to secure future indemnification obligations to Janssen. If certain development milestones are met, there's another $20 million in the kitty for Cerecor going forward.Take these two developments together (the strategic focus pivot and the deal with Janssen) and you've essentially got a completely different company from the one that entered 2017. Cerecor is a fresh young biotechnology play with a healthy cash balance (including the latest and just discussed cash injection, runway looks good through until at least the end of next year) and a pipeline that's potentially going to target rare diseases in billion-dollar indications.With this being said, you'd expect that the company would appreciate in value above and beyond the price at which it traded subsequent to its late 2016 collapse; well above and beyond, in fact. Take a look at the chart, however, and it's clear that that's not the case. Even with the run mentioned in the opener to this article taken into account, Cerecor trades for just $0.73 a share and a market capitalization of $18 million. Cash balance as of today is somewhere between $25 million and $28 million (based on a June end cash figure of $5.5 million and the $21.25 picked up right away from Janssen, so not including the escrow funds), meaning that, at its current price, Cerecor is trading at something like a 35% discount to its cash balance. There is practically no debt on the books (around $600K at last filing, June 30) so there's no reason for this discrepancy between cash and valuation.In this sense, the company is a two-pronged exposure.First, anyone looking for a quick return could pick up shares in anticipation of a near-term revaluation towards cash balance. Second, as a longer-term allocation, there is plenty in the way of catalysts on cards from Cerecor's remaining pipeline (especially the CERC-301 asset in the neurological indications) to keep speculative volume flowing into the stock ahead of any regulatory commercial success.Here's our previous coverage on this stock. We will be updating our subscribers as soon as we know more. For the latest updates on CERC, sign up below!Image courtesy of Francisco Gonzalez via FlickrDisclosure: We have no position in CERC and have not been compensated for this article.
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