The risk averse are likely to mostly stay away from the highly volatile biotech sector but for those ready to embrace the danger, there can be ample rewards.
Just ask Voyager (VYGR) investors following Wednesday’s action. Shares gained 57% in the session after the micro-cap announced a deal with Pfizer that, in total, could be worth $630 million.
Voyager entered into a License Option Agreement with the pharma giant for the potential use of two novel capsids generated from Voyager’s RNA-driven TRACER platform, one for the treatment of a neurological disorder and the second for a cardiovascular disease.
The deal includes an upfront payment of $30 million, a $20 million exercise fee for the two options ($10 million each) and, potentially, $580 million in milestone payments. If a product using the capsids makes its way to the market, there will also be mid- to high-single-digit percentage royalties due.
As Wells Fargo’s Yanan Zhu notes, like for many small clinical-stage biotechs, “risk in adequacy of cash runway,” is a potential issue for Voyager. The company saw out 2Q21 with total cash and cash equivalents of roughly of $143 million so the deal is set to strengthen the balance sheet.
It also provides “early validation” for the TRACER platform and could set the scene for additional licensing agreements with “other potential partners.” These will also be important for “extending VYGR's cash runway.”
“Overall,” Zhu summed up, “We continue to believe that the main value driver for the company is its internal pipeline powered by TRACER (four neurological disease programs in discovery stage), and as such we would await further visibility on the development timelines of the internal pipeline programs in relation to available cash runway.”
For now, the analyst remains on the sidelines with an Equal Weight (i.e. Hold) rating, although his $5 price target could still generate returns of 34% over the coming months. (To watch Zhu’s track record, click here)
Most analysts are taking a similar stance. Of the 6 reviews on record, 5 say Hold, while only one recommends to Buy, culminating in the stock’s Hold consensus rating. However, there are some anticipated gains here; the $5.13 average target implies investors could be sitting on returns of 57% a year from now. (See Voyager stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.