Special purpose acquisition companies (SPACs) can be exciting to invest in, though there are always risks involved. This should definitely be kept in mind with eFFECTOR Therapeutics (NASDAQ:EFTR), as EFTR stock recently debuted on the Nasdaq Exchange in the wake of a SPAC merger.
Not long ago, InvestorPlace contributor
O’Brient further observed that EFTR stock rose by as much as 88%. This outsized price move might spur concerns about SPAC hype, and I fully understand those concerns.
That’s why I’m only recommending a small-sized position in the stock if you choose to invest at all. Still, as we explore
A Closer Look at EFTR Stock
Until mid-August of this year, EFTR stock (which used to trade as Locust Walk Acquisition Corp. or LWAC stock on the Nasdaq Exchange) was hovering near $10.
That’s not unusual for a SPAC stock prior to the shell company’s merger announcement.
The share price leaped 460% to $49.10 during the pre-market hours on Aug. 25 after the stockholders approved the proposals related to the business combination with eFFECTOR Therapeutics.
As you can see, SPAC investing can be quite enjoyable and profitable – as long as your timing is good and you’re on the right side of the trade.
EFTR stock thrashed around wildly, sinking to $8.50 in early September but then recovering and shooting up to $27 on Sept. 8.
As of Sept. 15, the share price was hovering near $18 and heaven only knows where it will go next. Volatility is the name of the game here, so caution is definitely advised.
If you wanted to be really cautious about it, then you could establish a buy-up price such as $10.
EFTR stock might or might not get there, but if it does, then at least you won’t be buying at the top.
A Pioneer in Oncology Science
The most important thing is to be familiar with the company you’re investing in.
So, let’s delve into the details of eFFECTOR Therapeutics. This clinical-stage biopharmaceutical company is currently pioneering the development of a new class of oncology drugs.
These drugs are known as selective translation regulator inhibitors or STRIs.
As eFFECTOR President and CEO Steve Worland explains, his company is “advancing the development of STRIs with the potential to target a central node that drives multiple disease processes simultaneously, including cancer’s inherent escape mechanisms.”
The company’s lead product candidate is an MNK inhibitor known as tomivosertib.
It’s currently being evaluated in a Phase 2b clinical trial in combination with pembrolizumab for patients with metastatic NSCLC (non-small-cell lung cancer).
A Covid-19 Connection
Just to be clear, NSCLC is the most common kind of lung cancer, as it comprises around 80% to 85% percent of all cases.
Moreover, the NSCLC is referred to as metastatic when it has spread from the lungs to other parts of the body.
So, eFFECTOR’s MNK inhibitor has the potential to save many lives if it’s fully approved by regulators.
At the same time, the world is still focused on the Covid-19 pandemic. The interest in this topic remains elevated due to the delta and other variant strains.
In that vein, eFFECTOR Therapeutics apparently has a drug therapy in the works that targets specified instances of Covid-19.
As the company states, “Certain RNA viruses, including SARS-CoV-2, the causative agent of COVID-19, hijack the host cell translational machinery to drive viral replication.”
Consequently, the eFFECTOR team is “planning to test one of our STRIs, zotatifin, in patients with mild-to-moderate COVID 19.”
The Bottom Line
What we’ve learned today is that eFFECTOR Therapeutics is aggressively targeting multiple, potentially life-threatening conditions. These include lung cancer and specified cases of Covid-19.
It’s risky to invest in EFTR stock – make no mistake about that. SPAC stocks and biopharmaceutical stocks can be volatile, so please exercise caution here.
Nevertheless, eFFECTOR Therapeutics could provide outsized returns to risk-tolerant investors.
Just be sure to stay small in your position size – and consider waiting until the share price hits $10 before getting in.
On the date of publication, David Moadel 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.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.
