When bad news came for small-cap biopharma company Metabasis Therapeutics (MBRX), its share price took a major hit.  We looked into why Zacks senior biotech analyst Jason Napodano, CFA now feels the shares trade near fair value:

'Metabasis Therapeutics, Inc. is a biopharmaceutical company that engages in the discovery and development of drugs for chronic diseases involving pathways in the liver. In July 2007, the company suffered two major setbacks when its lead drug, CS-907, failed to meet the primary endpoint in a phase IIb trial, and Schering-Plough (SGP) terminated its agreement for the development of pradefovir based on the drug's toxicology results.

'Both products were in mid- to late-stage trials. The shares plummeted by 54 percent in response to the news. Given the recent setbacks and lack of visibility, we maintain our Hold rating on the stock with a price target of $3.25.

'Even if the company is successful in entering into a new partnership, we believe that the company will need to raise cash sometime in 2008 and, potentially, again in 2009. We believe that the company will need to fund its operations with a mix of debt and equity financing. Additional development setbacks will severely hamper the company's ability to raise cash from the market.'