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Menlo Therapeutics is a Must-Watch Ahead of June PDUFA Date, Says Analyst

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)

To find good ideas for healthcare stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

Marty Shtrubel
Marty Shtrubel was born in the UK, raised in Israel, and then headed back to London, where he made music and pursued a career in sound recording. After a move back to Tel Aviv, he set off on a new path and now works as a financial blogger at TipRanks.

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