Now could be the time to buy Clarity Pharmaceuticals Ltd (ASX: CU6) shares.
That's the view of analysts at Bell Potter, which believes that "a very special asset" makes the ASX stock dirt cheap at current levels.
Though, it concedes that it would only be suitable for investors that have a high tolerance for risk.
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What is the broker saying about this ASX stock?
The broker believes that a recent capital raising is a bit of a milestone for the biotechnology company and should be seen as a major vote of confidence. It said:
The recent capital raise for $203m (48.3m shares @ $4.20, 15% dilution) represents a major vote of confidence by shareholders in support of the company's strategy and the priorities for its clinical program. Following the raise CU6 has ~$288m in cash with the capital to be deployed for completion of the clinical program and advance preparations for commercialisation. Most importantly CU6 no longer not requires a partner for its upcoming therapeutic trial.
It also highlights that some important data will be released soon and it feels optimistic that the results will be positive. Bell Potter explains:
In the coming months Co-PSMA data will emerge and is widely expected to differentiate 64Cu SAR bis-PSMA from either of the currently marketed PSMA imaging agents, include second generation agents for Ga-68 and F-18. The short half life of both is the key limiting factor which forever constrains their sensitivity/specificity.
Big returns
In light of the above, this morning Bell Potter retained its speculative buy rating on the ASX stock with an improved price target of $5.70 (from $5.00).
Based on its current share price of $3.43, this implies potential upside of 66% for investors over the next 12 months.
Though, its shares could go much higher than this if everything goes to plans. Bell Potter concludes:
There are no changes to earnings in the forecast period, however, valuation is raised 14% to $5.70. CU6 is now funded to complete the full clinical program in prostate cancer including both imaging trials and a future approval study for its therapeutic ( 67Cu SAR bis PSMA). The certainty of the funding decreases the overall risk profile of the group in addition to providing a stronger position from which to negotiate future terms of a distribution deal in the US. Valuation raised to $5.70. On an un-risked basis (reducing clinical trial risk to nil for mCRPC only), the valuation increases to ~$13 representing a market cap of A$4.8bn (US$3.1bn) which is not unreasonable compared to prior transactions in the sector.
