Shares of drug maker Trevena (TRVN) are up by 112% in 2020. Behind the rally lies the FDA’s approval of Olinvyk (oliceridine), the company’s opioid agonist. The treatment has been given the go ahead for the management of acute pain in adults who require an intravenous opioid pain reliever.
However, the early August approval was followed by a $50 million equity offering, the result of which has seen shares pull back since.
As the company gears up for Olinvyk’s launch and now backed by a strengthened balance sheet, H.C. Wainwright analyst Douglas Tsao encourages investors to get grab a bag of TRVN shares in anticipation of what the 5-star analyst thinks will be a breakout year.
Tsao has a Buy rating on TRVN shares, accompanied by a $5 price target. Investors could be sitting on a massive 179% gain should Tsao’s thesis play out over the next 12 months. (To watch Tsao’s track record, click here)
Alongside the $50 million raise, the company can utilize its ATM and make use of the $3 million it has received in a milestone payment from its Chinese partner Jiangsu Nhwa Pharmaceutical for the approval of Olinvyk in the U.S.
Although Tsao believes physicians' acceptance of "virtual" forums could lead to an “efficient” Olinvyk launch, the new cash balance of over $109 million should provide a safety net when bringing the new product to market.
“The newfound balance sheet strength does afford greater patience for Olinvyk's launch, since the company enters the commercialization without a financing overhang. This is important, in our view, given continued uncertainties around COVID-19. That said, we think Olinvyk's adoption could benefit from the elective surgery backlog caused by COVID-19, especially in high-risk patients who avoided hospitals and surgery centers during the pandemic’s early stages,” Tsao opined.
Additionally, Tsao believes that following the U.S. approval it would not come as much of a surprise “to see other deals signed for other key countries and regions.”
Tsao’s colleagues agree. Although over the past 3 months only two other analysts have posted a review of Trevena’s prospects, both are vocal in their support. The two additional Buys result in a Strong Buy consensus rating and $5.33 average price target. The upside is plentiful – a whopping 219%, in fact - should the figure be met over the next 12 months. (See Trevena stock analysis on TipRanks)
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