Pharmaceutical companies like Ayala Pharmaceuticals (AYLA) have been front-and-center for investors for some time now. Today, AYLA stock gained lots of attention. It actually cleared ~175% in gains at one point, but the stock has pulled back a bit and is now up 147%. It’s still unclear if this stock is a good buy, as the gains, as impressive as they are, could be temporary.
What prompted this pharmaceutical company to nearly triple in the space of 24 hours? It’s not immediately clear. Some suggest the issue dates back to successful lab reports brought out earlier this month. While the data came out back on July 5, the company’s Twitter page announced the interim data results today.
That may have made much of the difference, as the results of Part A of Phase 2/3 trials were impressive by virtually any standard. Most of the patients who took Ayala’s new AL102 showed a reduction in tumor size after 16 weeks. Moreover, AL102 proved well-tolerated at all levels of dosing, suggesting it would work well with most patients with desmoid tumors.
The last 12 months for Ayala Pharmaceuticals shares looked like the company itself was at death’s door. This time last year, shares were up around $14 each. A slide, followed by a rally, occurred. Then the company began its long, slow slide to virtually zero. Even today, the company struggled to stay above the $2 per share mark, closing yesterday at $0.87.
If Ayala Pharmaceuticals has what it seems like it has, this could be a very big day for the company and its investors. Right now, I’m neutral on AYLA because too many questions are unanswered as of now. If the answers prove to be as good as they might be, though, a flier of scant value today could prove to be an absolute winner down the line.
Wall Street’s Take on AYLA Stock
Turning to Wall Street, Ayala Pharmaceuticals has a Moderate Buy consensus rating. That’s based on two Buys assigned in the past three months. The average Ayala Pharmaceuticals price target of $15 implies 607.5% upside potential.
Analyst price targets range from a low of $12 per share to a high of $18 per share.
Investor Sentiment Is Trending Upward, Quietly
Currently, Ayala Pharmaceuticals does not have a Smart Score on TipRanks. As a company, it is not ranked, and this quiet lack of sentiment is actually reflected in the broader measures of investor sentiment.
Hedge fund involvement, based on the results of the TipRanks 13-F Tracker, shows that hedge funds have had no involvement at all with Ayala Pharmaceuticals since December 2020. Interestingly, hedge fund involvement shot up in the space between September and December 2020, as they raised their involvement from 12,063 shares in September to 113,450 shares in December.
However, hedge funds abandoned the stock altogether the quarter thereafter. This is about the time the stock saw its share price peak. On February 11, 2021, AYLA hit a high of $28.68 and never saw that price again.
Insider trading, what there is of it, is universally positive. So far, only three transactions have been recorded by insiders in the last year. In April 2022, there were three Buy transactions that took place. Each of these was considered an Uninformative Buy, so they don’t add much to the overall sentiment.
Retail investors (that have TipRanks portfolios) have been starting to come back as well. The number of TipRanks portfolios that hold Ayala Pharmaceuticals stock decreased 0.1% in the last 30 days. However, portfolios holding Ayala have increased 0.5% in the last seven days.
Finally, there’s the matter of Ayala’s dividend history. It has yet to pay a dividend. It also appears to have no plans to start paying a dividend. Given the rate of Ayala’s decline in the last two years, it’s safe to say the company is focused on growing its share price back to previously-seen levels.
Plenty of Potential, but Not Much Else
Ayala Pharmaceuticals hasn’t done too much lately apart from its most recent news release. The biggest news about Ayala Pharmaceuticals is the combination of its nearly-month-old medical advancements and some recent changes in analyst sentiment. If it weren’t for its unusual pre-market surges, the last news item out of the company would have hit almost three weeks ago.
However, analysts are coming around to the company. Given that there were only two Buys assigned in the last three months, though, that’s something of a sign itself. There’s not a lot of sentiment shift from investors just yet, but it’s also universally positive. With Noble Financial’s Robert LeBoyer and H.C. Wainwright’s Ram Selvaraju now very much in Ayala’s corner, that may draw some new attention.
Sadly, Ayala has managed to make headway not so much in fighting cancer but rather in fighting tumors. That may sound like unnecessarily splitting hairs, but when it comes to desmoid tumors, the distinction is important.
Desmoid tumors are described by the Mayo Clinic as “noncancerous growths that occur in the connective tissue.” Ayala wouldn’t even get the massive press coverage that would accompany a “cure for cancer.” However, it would make some gains on a treatment for a disease that behaves at least somewhat like cancer.
On the plus side, when almost every patient in a study is seeing improvements from four months on one treatment, that’s a treatment to pay attention to. The fact that it’s well-tolerated at most doses also suggests positive sentiment.
This is both the problem and the potential here: there’s very little to go on. Hedge funds haven’t touched this company in two years. Insiders are making very few moves. The news isn’t supporting any major advancements.
This company is a big featureless wall in the middle of a fog bank. What word there’s been out of the company is positive, but not much to frame an effective strategy around.
Conclusion: A Stock That’s Virtually All Potential Right Now
This stock is pretty much pure potential. It costs extraordinarily little to get in. Sadly, it will probably never make the staggering conclusion that it’s cured cancer. However, it could get a much smaller bump from effectively treating desmoid tumors without surgery.
That assumes, of course, that late-stage testing looks like early-stage testing. We all know how often that proposition has fallen apart before.
Thus, I’m neutral on Ayala Pharmaceuticals. I don’t fault anybody who falls prey to the Powerball effect here. Ayala stock could be a bargain right now. If it gets anywhere near even its lowest price targets, it still would be a ~455% gain.
The upside potential seen by analyst figures may ultimately be dwarfed if this all comes to pass. That may be too many “ifs” and “mays” for some investors’ taste. Still, at these prices, it’s hard to see why someone wouldn’t at least want to take out a small position.
