Mersana Therapeutics (NASDAQ: MRSN) is a biopharmaceutical company that discovers and develops “antibody-drug conjugate (ADC) therapies to treat patients fighting cancer.” It is a penny stock, with the stock closing at $3.29 on May 18.
Shares of the company have dropped 12% in the past month, as in Q1, its net losses widened to $47.3 million, or $0.59 per share versus $34.7 million, or $0.50 per share in the same quarter a year back.
Moreover, Mersana’s expenses are also rising as research and development expenses increased 30.6% year-over-year to $35.8 million in Q1. General and administrative expenses shot up to $12.8 million in Q1 versus $7.2 million in the same quarter last year.
Wall Street’s Take
In this scenario, H.C. Wainwright analyst Edward White is, however, bullish on the stock with a Buy rating and a price target of $19, implying upside potential of 430.7% from current levels.
The analyst is upbeat about the U.S. Food and Drug Administration (FDA) granting orphan drug designation to Mersana’s XMT-2056, an antibody-drug conjugate (ADC) for the treatment of gastric cancer. White is also hopeful about the revenue potential for UpRi – an ADC for the treatment of ovarian cancer.
The analyst estimates “sales of $761 million for UpRi in ovarian cancer in 2030.”
Other Wall Street analysts also side with White and are also optimistic about the stock with a Strong Buy consensus rating based on five Buys and one Hold. The average Mersana Therapeutics price target of $17.40 implies 386% upside potential.
Increasing Short Interest
To compound the company’s woes, there is high short interest in the stock. Short interest refers to the number of shares that have been sold short by investors but have not yet been closed out. Mersana saw significant short interest in the month of April.
A high short interest indicates a pessimistic stance on the part of investors. According to Nasdaq data, as of April 29, there was short interest totaling 4,278,262 shares, a growth of 23.5% from the total of 3,462,679 shares on April 15. Based on an average daily trading volume of 1,300,703 shares, the days-to-cover ratio is currently around 3.3 days.
This ratio indicates the number of days it takes short sellers to repurchase all the borrowed shares or cover their positions.
Nonetheless, Insiders are Optimistic
Interestingly, in this pessimistic scenario, corporate insiders seem to be positive about the stock. On May 18, Andrew Hack MD, Ph.D., who has been on Mersana’s Board of Directors since January 2017, purchased shares worth $1.1 million.
Since March 2019, Hack has also served as “a Managing Director of Bain Capital Life Sciences, a private equity fund that invests in biopharmaceutical, specialty pharmaceutical, medical device, diagnostics, and enabling life science technology companies globally.”
According to the TipRanks Insiders page, corporate insiders have bought shares worth $6.1 million in the past three months.
Discover new investment ideas with data you can trust
Read full Disclaimer & Disclosure.
