Aptinyx (NASDAQ:APTX) stock looks really promising right here.
The company is focused on one thing – the NMDA receptor. This receptor helps our synapses (the connections in our brain) are key to learning, memory, and synaptic plasticity (keeping our brain nimble).
What does this mean for non-scientists? It means APTX is developing some impressive drugs to treat diabetic neuropathy, PTSD, and biggest of all dementia and Parkinson’s-related plasticity issues.
As a matter of fact, it has FDA fast-track approval for two of its drugs. One is for diabetic neuropathy (about a $11 billion market). The second is for PTSD, which it’s estimated that one in 11 people will be affected by in their lifetimes.
Certainly this would be exciting news on its own. But if you link that up with the potential for helping people with dementia APTX is in the middle of very big market.
High Hopes, Long Slog for APTX Stock
Looking at the company’s stock chart, you can see that investors were very excited in 2018 when it went public. APTX stock topped $30 a share in September of that year.
The trouble is, that is its all-time high and APTX stock now trades at about one-tenth that price now. Its 52-week high now sits at $6.47 and it’s off that high by more than 50%. It will open this morning at about $2.89.
Well, this is the story of a lot of small biotechs. There’s a lot of buzz when they launch and individual investors get excited by the story, hoping it’s going to be a huge winner overnight.
But then they start to realize that the company has to get through significant hoops just to get the potential drug ready for trials, and trials last years.
Over time, most of those “quick-buck” investors drop out from sheer boredom and move on to the next shiny object. This is about the time traders step in, playing the increasing volatility.
Since the stock is too small for institutional traders to get involved, the stock gets knocked around until most investors lose interest and move on to new stocks to play with.
Small Stocks, Long View
There are three things to know about buying into small stocks with big potential.
First, you have to be committed to the long haul, especially biotechs. These firms have a great idea they need to turn into a great product. In this world, they need to cross the “valley of death” between the lab and fab (fabrication).
That takes a smart management team that understands how to shepherd the technology into a marketable product as well as the scientists that made the drug. The valley of death is littered with companies that had the ideas but not the business skills to pull this off.
Second, choose your spots. Usually small biotechs launch with fanfare and then fade into near obscurity, some never to rise again. And if funding dries up, the company will start splitting the stock, diluting early investors’ money.
Fools rush in where angels fear to tread. And here, I’m talking about angel investors. There’s no hurry. Buy into a product, not an idea. See how the management team gets through the good and bad times.
Love the Ride
Finally, expect a wild ride until the drugs hit the market. APTX has a great advantage with fast-track drugs. That means the Food and Drug Administration has already looked at studies and initial trials and likes what it sees.
But even these drugs will take another year or two before they’re on the market. The phase two study isn’t expected to be over until next June.
The bottom line: APTX stock is very interesting here. It has three interesting drugs that are moving through trials. It has been beaten up and sits closer to its 52-week lows than highs.
If you’re a risk-tolerant investor, this is a good time to take a risk on this stock. But remember, there’s no real rush. Right now it’s cheap, but you have a long ride. If you have some extra risk capital and are bottom fishing promising biotechs, APTX would be a good choice.
Disclosure: On the date of publication, GS Early did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
GS Early has been an award-winning financial writer and editor for nearly three decades, working with many of the leading financial editors and publishers during that time. He’s seen a few things and heard plenty.