Canadian pharma small-cap Milestone Pharmaceuticals (NASDAQ:MIST) has had a tumultuous ride since shares starting trading nearly two years ago. MIST stock was soon going for over $27. It dropped below $2 a share a year ago, clawed its way back to nearly $9 in early February, and now sits around the $6 level. What is going on with this company to cause this degree of volatility? And with MIST shares currently going for 70% less than they were two years ago, is this a buying opportunity? Or is this a stock to avoid?
Milestone earns a “B” rating in Portfolio Grader. This is a company that is not yet profitable — in fact it doesn’t even have any revenue at this point — but it is well-funded. Most importantly, it has a product in development that could be a game-changer. A lucrative game-changer. Milestone Pharmaceuticals is laser-focused on a nasal spray that would be used to treat episodic cardiovascular episodes. These conditions affect millions of Americans. A nasal spray that could be carried around to use as needed for immediate relief of symptoms would have a huge market.
A Tale of Two Dates
As I have said before, small-cap stocks are prone to rapid fluctuation in share prices. With pharmaceutical companies, that volatility is often more pronounced. With so much riding on the trials of products in development, any news can have a dramatic effect.
This can be seen clearly with Milestone Pharmaceuticals. There are two dates in the past year that tell the story of MIST stock’s performance.
The first is March 23, 2020. On that date, the company announced that its investigational new drug, Etripamil nasal spray, had failed Phase 3 clinical trials. The drug was created to treat PSVT (or Paroxysmal Supraventricular Tachycardia), a type of abnormal heart rhythm. The company — and investors — had high hopes for the nasal spray. With 7.5 million Americans projected to be suffering from PSVT by 2050, the market for a treatment is big. News of the clinical failure caused a stampede to the exits. MIST stock plummeted, quickly shedding over 80% of its value.
The second date to keep in mind is July 23, 2020. Etripamil nasal spray was back in the news. This time, it was good news. Milestone announced it had reached an agreement with the U.S. Food and Drug Administration (FDA). Under the agreement, the company would be able to continue the phase 3 trial for the medication under modified conditions instead of having to restart. If all goes well this time, the company anticipates having final results in late 2021 or early 2022.
In addition, Milestone announced it had secured a $25 million investment from RTW Investments. The money gave the company a financial lifeline to continue operations until the second quarter of 2022.
The market reaction was immediate. By the end of the day, MIST stock had posted a 161% gain.
Bottom Line on Mist Stock
An investment in Milestone Pharmaceuticals is a bet on the company’s Etripamil nasal spray. It’s that black and white. At the moment, Etripamil is involved in three clinical studies: the phase 3 trial for PSVT, plus phase 1 trials for Atrial Fibrillation and Angina.
The company has no revenues at this stage, just expenses. In its fourth quarter those amounted to $5.8 million for research and development, $1.7 million for general and administrative costs, and $1.3 million in commercial expenses. The company reported an operating loss of $8.8 million for the quarter. With the cash infusion from RTW investments, Milestone has cash, cash equivalents, and short-term investments of $142.3 million. That’s sufficient to keep the lights on until Etripamil is approved — or, through 2022.
With shares currently trading at a 31% discount compared to their high close in early February, whether MIST stock offers a smart investment opportunity depends purely on your take on Etripamil’s odds of making it through clinical trials to FDA approval. If Etripamil makes it to production, MIST stock has huge growth potential. If it fails, there’s no plan B.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
Louis Navellier, who has been called “one of the most important money managers of our time,” has broken the silence in this shocking “tell all” video… exposing one of the most shocking events in our country’s history… and the one move every American needs to make today.