It has been a rollercoaster year for EchoIQ Ltd (ASX: EIQ) shares.
The ASX tech stock has been as low as 17 cents and as high as $1.88.
On Wednesday, the medical technology company's shares are fetching 66 cents, down around 65% from their high.
Is this pullback a buying opportunity for investors? Let's see what Bell Potter is saying.
Image source: Getty Images
What is the broker saying?
Bell Potter notes that EchoIQ is trying to help with early identification of heart failure, which is a big market.
However, things have not been going to plan, with disappointing feedback from the US FDA recently. It explains:
The unmet need for a diagnostic aid to early identification of heart failure remains acute. Tens of thousands each year progress silently from asymptomatic disease to first symptoms, which may include modestly swollen ankles and the occasional shortness of breath, through to later stage heart failure, by which time it is too late to significantly slow the disease or better yet stop its progression all together. EchoSolv HF still has the potential to fill this void.
Providing clarification of our previous assumption, data from the Mayo Validation Study underpinned the recent 510(k) application for registration of EchoSolv HF. The Mayo Clinic Platform is a highly regarded research institution in the US and for this reason the conclusions from the 17,000 patient confirmatory study which met the clinical endpoints and reported 99.5% sensitivity and 91% specificity for detection of early stage heart failure should have been a slam dunk for regulatory approval – or so we thought. The market was caught off guard when the FDA issued a 'Not Substantially Equivalent' notice earlier this month.
Should you buy this ASX tech stock?
According to the note, the broker has retained its speculative sell rating and 30 cents price target on the ASX tech stock.
Based on its current share price of 66 cents, this implies potential downside of almost 55%.
Commenting on its bearish view of the stock, Bell Potter said:
The vacuum of data relating to EchoSolv HF is a frustration. The peer reviewed paper of the Mayo Validation Study is not yet published and the company is yet to release any substantial details regarding the nature of the matters raised in the Not Substantially Equivalent notification. Accordingly there remains insufficient data from which to make an objective assessment of these factors.
For these reasons we maintain our highly conservative valuation and Sell (Speculative) recommendation. EIQ remains adamant there is a clear path forward to obtaining FDA clearance for EchoSolv HF, however the market release of 17 September actually identifies several options. Clearly a lot of work yet to do.
