Recent weakness in the biotechnology sector is creating some interesting opportunities in smaller names that have been drifting lower due primarily to disinterest.
One good example on my radar screen is ProQR Therapeutics (PRQR) . ProQR is a Netherlands-based biotechnology company with a laboratory in Cambridge, Mass. It is developing RNA therapies for inherited retinal diseases that cause vision loss and blindness. Most of these diseases have no current treatments.
On March 24, the company released results from a clinical trial for the treatment of Usher syndrome, which causes blindness and deafness. The results showed improvement in visual acuity, visual fields, and other areas after a single dose. This "proof of concept" is significant, especially as there are no other current treatments.
The stock jumped more than 50% on the news but faded as the company moved to raise cash for further necessary studies. It priced a secondary offering at $6.50 on March 31.
Analysts have placed very aggressive price targets on the stock. Cantor Fitzgerald raised its target to $33, J.P. Morgan raised its target to $35, and Citibank raised its target to $44.
In the recent poor market action, the stock failed to hold the $6.50 level even though the underwriters elected to fully exercise their options to buy shares at the offering price. There is no negative news to account for this poor price action. It is primarily a function of a poor market environment for small biotechnology stocks, even if they have great promise.
There is no immediate news catalyst for the stock, but there should be some incremental news about progress. With the stock trading around the secondary price, the downside risk is very limited, and in view of the substantial price targets from analysts, the potential for a move higher on news is quite good.