Out on the Street, small-cap biotechs have taken center stage. Those racing to develop a COVID-19 vaccine or treatment have been thrust into the spotlight, receiving a standing ovation in the form of skyrocketing valuations.
But not all names inhabiting this space are involved in the search for coronavirus solutions and the accompanying share gains. Take dermatology-focused Menlo therapeutics (MNLO), for example. The stock is down by 61% year-to-date.
That being said, H.C. Wainwright analyst Oren Livnat sees opportunity ahead and highlights the bullish case for the biotech.
2020 has marked Menlo’s transition to a commercial stage company. Earlier this year, Menlo merged with fellow dermatology-focused company, Foamix, and during the first quarter, the company launched Foamix’s acne treatment, AMZEEQ, the first-ever FDA approved topical form of minocycline.
Having already taken COVID-19’s impact into account when he previously reduced 2020 estimates for AMZEEQ, Livnat is confident the product is about to take off, and projects peak AMZEEQ sales of over $200 million.
“We still believe there is high interest in Menlo’s novel topical minocycline, and expect volume to resume a steep upward trajectory post-COVID. Recall that before COVID, AMZEEQ’s initial Rx ramp was strong, exceeding our initial 1Q forecasts by 25% and quickly reaching over 15% of or peak projected volume several years out,” the analyst said.
Adding to the good news, there’s another possible catalyst ahead. A June 2 PDUFA date has been set for FMX103 — a potential treatment of papulopustular rosacea.
Should the treatment gain approval, Menlo has set its sights on a 4Q launch and has “conservatively” projected peak sales of $66 million.
Down to the nitty gritty, what does it all mean for investors? Livnat reiterated a Buy rating on Menlo and based on “higher projected gross margins,” raised the price target from $2 to $2.50. Upside potential from current levels is a solid 37%. (To watch Livnat’s track record, click here)
The rest of the Street has even higher hopes for the dermatology specialist. A clean sweep of 6 Buy ratings coalesce into a Strong Buy consensus rating. At $7.10, the average price target could provide upside of a massive 320%, should it be met over the next 12 months. (See Menlo stock analysis on TipRanks)
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