If you are hunting for some big returns, EBR Systems Inc (ASX: EBR) shares could be worth considering.
That's the view of analysts at Bell Potter, who believe this ASX biotech stock could rocket from current levels.
Image source: Getty Images
What is this ASX biotech stock?
EBR Systems is a clinical-stage company that has developed a patented Wireless Stimulation Endocardially (WiSE) technology.
This is for the treatment of cardiac rhythm disease and to eliminate the need for cardiac pacing leads when delivering cardiac resynchronisation therapy.
Bell Potter was pleased with the company's performance in the first quarter. And while its cash burn increased, it notes that this relates to large one-off items, so isn't concerned. It said:
The headline data had been pre-released which showed that sales doubled qoq, while unit volumes, ASP, hospital contracts signed and physicians trained, all heading in the right direction. All hospital contracts are continuing to be priced at the maximum rate of c.US$63k. Reported gross margins were at a relatively low c.7.8% given the early commercialisation phase, use of old inventory and use of the old manufacturing facility. If current inventory prices were used, the gross margin would have been c.- 25.4%. EBR expect to be in the new facility by the end of 3Q26, from which time gross margins should begin to increase through the combination of new automated machinery to drive efficiency in manufacturing, and scale.
The Adj. EBITDA loss of c.- US$15.1m v c.-US$9.2m pcp reflects the scale up of commercial operations. Operating Cash Outflow of c.-US$20.2m reflected one-off items including bonuses, payroll tax, demo and design units, as well as front loading of leasehold improvements (c.US$2.6m), which will be reimbursed by the landlord in the June quarter. Even allowing for the one-off items, EBR is still hovering at around two quarters of cash / cash equivalents remaining.
Big potential returns
According to the note, in response to the update, Bell Potter has retained its buy rating and $2.00 price target on the ASX biotech stock.
Based on its current share price of 57.5 cents, this implies potential upside of approximately 250% over the next 12 months.
Bell Potter believes it is just its funding question that is holding back its shares. Once resolved, the broker believes its shares could rally. It explains:
No change to earnings / valuation. Given the expectation of a further c.US$15m in revenue over the balance of CY26, we expect 1Q26 to be the peak in operating losses. Once the funding question is resolved, which has been impeding investor sentiment, we would expect the share price to rally.
