Trouble is, it’s difficult to identify permanent cures to viral diseases. For example, even though doctors completely understand how the flu virus works, millions of people still come down with a flu bug every year. And in some instances, the flu can have fatal consequences.
But little-known NanoViricides Inc (OTCBB:NNVC) may have “cracked the code” when it comes to viruses. The company still has a lot to prove, as is the case with any young biotech stock that trades for around $1. But it appears to be making progress, and if it can deliver on at least one of its several drugs in development, the upside could be significant.
Though the company has been around since 2005, the past year has been quite eventful, and NanoViricides Inc (OTCBB:NNVC) is seeing increasing trading volume and a rising share price.
A quick timeline of NanoViricides Inc (OTCBB:NNVC)’s recent progress:
— November 2012: The company hires Bioanalytical Systems, Inc. (NASDAQ:BASI) to conduct safety studies for its influenza drug, FluCide. The design of the study had previously been approved by the FDA. In late 2012, the company also identified a facility and management group that will oversee the construction of production lines that will provide a high volume of drugs to be used in clinical trials. The facility is expected to be ready by late 2013 or early 2014.
— January 2013: Early pre-clinical trials produce efficacy results that are stronger than Roche Holding Ltd. (ADR) (OTCMKTS:RHHBY) Tamiflu, the current most popular flu vaccine available for sale.
— February 2013: The company completes a $6 million capital raise, and along with $5 million raised in 2012, says it believes it has enough cash on hand to fund operations through the end of 2014 while pursuing initial human clinical trials.
— June 2013: The company files for orphan drug status with the Food and Drug Administration for its DengueCide drug to treat dengue fever and receives that designation from the FDA in mid-August. A similar application with the European Medicines Agency is filed in July and approved in September.
— June 2013: The Lovelace Respiratory Research Institute, a biomedical research organization with 1,200 employees and 150 Ph.D.s, agrees to conduct clinical studies for NanoViricides Inc (OTCBB:NNVC)’s flu drug, as well as a drug that is aimed at the MERS virus (Middle East respiratory syndrome coronavirus).
Though NanoViricides Inc (OTCBB:NNVC) believes that a wide variety of viruses can be treated with its biotechnology, influenza and dengue fever clearly stand out as key areas of focus for the company in the near term.
What kind of market opportunities are we looking at? Well, Tamiflu has proven to be popular for treating influenza, with a potential annual revenue opportunity exceeding $3 billion, according to Influmedix.com.
There is no cure for dengue fever, nor can we glean a market size for a drug that treats it. But the World Health Organization believes there may be 50 million to 100 million dengue infections worldwide every year.
To be sure, this small company also carries considerable risk. Many drugs that appear quite promising in small-scale tests fail to deliver solid safety and efficacy data as clinical trials grow larger. Indeed, the vast majority of early-stage drugs fail, and NNVC’s stock price would plunge sharply if that were to happen.
Moreover, a steady stream of capital infusions over the years has caused the share count to swell to 163 million. Investors should assume that the company needs to issue at least 40 million or 50 million more shares in coming years to further fund clinical trials. The company could also choose to sign a marketing deal with a large drug company, which would likely provide an equity infusion in exchange for sales rights, eliminating the need for further dilution.
While it’s virtually impossible to develop a specific target price for NNVC, we can make some broad assumptions. First, let’s assume that the number of shares outstanding eventually rises to 200 million. Second, let’s assume that the company is targeting an annual revenue opportunity of $500 million. Third, let’s assume that shares are eventually valued at three times revenue, or $1.5 billion. Lastly, let’s assume that NanoViricides Inc (OTCBB:NNVC) has only a 33% chance of success, so reduce that number back down to $500 million.
That equates to $2.50 a share, or about 100% upside from current levels. And if the company successfully brings its key drugs to market, then the ultimate $1.5 billion market value represents a move in the stock up to $7.50, a nearly 500% gain.
Risks to Consider: Note that this is a high-risk/high-reward stock, and as such, should never account for more than 5% of your portfolio on an initial investment basis.
Action to Take –>
–Buy NNVC up to $1.50
— Set stop-loss at $0.75
— Set initial price target at $2.50 for a potential 67% gain in six months
P.S. — I’m not a market technician, but I’ve seen enough charts in my day to know when a pattern is shaping up to be … interesting. I encourage you to check out my colleague Amber Hestla’s presentation to learn more about what the dreaded “triple top” could mean for your portfolio in the coming weeks.
The article This Virtually Unknown Stock Has 100% Upside originally appeared on StreetAuthority.com and is written by David Sterman.
David Sterman does not personally hold positions in any securities mentioned in this article. StreetAuthority LLC does not hold positions in any securities mentioned in this article.
