Xenon (NASDAQ:XENE) has bucked the downward trend in biotech this month and is up some 10% over the past few weeks. The stock also managed to rise nicely Friday even as the overall biotech sector gave up Thursday's gains. It sells for almost the exact price of Omeros as of the close of the trading week.
Since early August, three analyst firms have reiterated or initiated Buy ratings on this small biotech concern based in Canada. Price targets proffered range from $13 to $20 a share. Guggenheim is the most optimistic on Xenon with a $20 price target. Its analyst noted three reasons to be positive on the firm.
"1. XEN801 addresses an unmet need within the, large, ~$3.7B acne market and could present a novel mechanism of action to treat acne. The three mechanisms of action most commonly used to treat acne have been available for over 30 years. That said, innovative therapies launched over the past few decades have resulted in significant sales. This gives us confidence that XEN801 sales could exceed consensus expectations if it is approved.
2. The pain market needs safer drugs, outside of opioids, which XENE's Nav1.7 blockers could address. The government and the FDA's desire to reduce the abuse of opioids supports the development of novel pain drugs such as XENE's Nav1.7 blockers. We believe XENE and its partners for these drugs are well positioned to benefit from initiatives to move the market away from opioids.
3. There is a free call option on XENE's approved drug, Glybera, and other pipeline assets such as TV-45070 and Nav1.6, among others. Some of these assets could be monetized through partnerships"
Phase II readouts for XEN801 for the treatment of acne is due out inthe first quarter of 2017 and a Phase II readout for TV-45070 against Postherpetic neuralgia should hit in the first half of 2017. The company has just a $125 million market capitalization, positive analyst support and a couple of definable upcoming catalysts. One has to like Xenon's risk/reward profile over the next few quarters.
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