Recent analyst coverage for TRACON Pharmaceuticals (NASDAQ: TCON) reiterates a unanimous bullish forecast of around 400% by end-of-year 2022 for the stock, despite recent events damaging the company in the short term.
Even with this heavy negative price action, sentiments on this stock, including my own, remain bullish.
Company Overview
TRACON is a microcap clinical-stage pharmaceutical concern focusing on developing cancer therapies. Its pipeline has four product candidates, including flagship antibody therapy envafolimab for the treatment of soft tissue sarcoma.
Its products also include: TRC105, an anti-endoglin antibody for the treatment of solid tumor types; TRC205, for the treatment of fibrotic diseases; and TRC102, a small molecule made for lung cancer and glioblastoma.
Recent events have left the stock trading at a deep discount relative to its historical pricing. One recent catalyst is a $15-million bought offering deal in late July 2021, priced at a discount (at the time) of 22%, or 3.82 per share.
Naturally, investors were unhappy with a funding deal coming at such a discount, and that combined with a recent earnings miss to have the stock trading near its 52-week low of $2.18.
Conversely, the stock ratings continue to flash green on most of the TipRanks analytics scores, achieving a 9 out of 10 Smart Score with other recent momentum indicators.
Additionally, the TRACON price target continues to show significant upside with a near consensus from top analysts. Five analysts have reported Buy positions on the stock, with an average price target of $12.40, representing a 392.9% upside over the next 12 months.
Recent and Future Events, Catalysts
The most recent regulatory decision was an approval from China through TRACON’s partners, Alphamab Oncology and 3D Medicines (Beijing) Co. for envafolimab. This regulatory decision makes envafolimab the world’s first single-domain PD-L1 antibody for subcutaneous injection that has attained marketing authorization from Chinese regulators.
Prior to this approval, all marketed PD-1 and PD-L1 antibody drugs required intravenous infusions. Importantly, a subcutaneously administered PD-L1 like envafolimab is administered within 30 seconds in the physician’s office, greatly increasing convenience and shortening treatment times, as well as sparing patients from most infusion reactions.
Crossing the finish line with a subcutaneous PD-1 antibody drug approval would deliver incredible first-to-market bonuses to this tiny biotech.
Recent interim ENVASARC data was by all measures a success, showing such a positive safety profile and overall response rate (ORR) that the data monitoring committee recommends a total continuation and an additional higher dose group in the next cohort.
The market wasn’t impressed however, perhaps with the sentiment that patient enrollment is a bit too slow at only 36 patients from an expected enrollment of 160. Suffice to say, the de-risking value from this interim data is perhaps not yet fully understood.
The 1-year daily chart shows the considerable value TRACON has shed over 2021, beginning the year at a premium with excitement over ENVASARC dosing initiation, then heading for the basement as earnings misses and stock dilution events started to pile on.
There is a significant nearby range of consolidation between $3.60 and $4, a key level that technical analysts have raised alerts to. A key bullish reversal trend may also play out with a MACD/signal convergence along with the MACD signal crossing into positive territory, all potential events in the short-term.
Although the price action with this stock is primarily event-driven, a bullish technical signal could indicate changing winds for TRACON.
Bottom Line
Though TRACON was beat down over the past year, calls and signs of a bullish reversal in the company’s fortunes are growing. The most recent interim data for ENVASARC was a significant de-risking of the clinical trial, yet the market doesn’t seem to have churned this data through.
Any positive readout of data from the ENVASARC trial, slated for 22H1, would provide a big push to this microcap company and justify the consensus 4x multiple upside.
Download the TipRanks mobile app now
Disclosure: At the time of publication, Michael Ronzetti did not have a position in any of the securities mentioned in this article.
Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates. Read full disclaimer >>>
