Not long ago, InvestorPlace contributor William White reported on a massive jump in the trading volume of Biofrontera (NASDAQ:BFRI) shares. And indeed, BFRI stock was suddenly a red-hot item on Wall Street.
Just to recap, Biofrontera is a U.S.-based biopharmaceutical company commercializing pharmaceutical products to treat dermatological conditions. The company has a photodynamic therapy product called BF-RhodoLED, an LED lamp that can use light emission to detect skin conditions.
Also, Biofrontera commercializes a Food and Drug Administration (FDA)-approved topical antibiotic called Ameluz in the U.S. This gel-based drug can be used as an adjunct to photodynamic therapy.
As you can see, Biofrontera has an interesting product portfolio — and the company just earned a patent which could provide a significant added revenue source. The question is: how high could BFRI stock go, and is a $20 price target realistic?
A Closer Look at BFRI Stock
In early October, Biofrontera established a price range for its initial public offering (IPO) between $5 and $7. Then, later that month, the company settled on an IPO price of $5 per share.
It wasn’t an auspicious start, and the situation only got worse as BFRI stock slid to $2.50 — literally getting cut in half by Nov. 23.
Yet, that was the end of the story. Miraculously, the buyers stepped in and pushed the Biofrontera share price up to $10.40 on Nov. 26. That was the short-term peak and BFRI stock was soon back on a downtrend again. As of today, the stock was down to $4.23.
Without a doubt, $5 is going to be a key level to keep your eye on as the fierce tug-of-war between the buyers and sellers could persist for quite a while.
Increasing the Competitive Advantage
It’s a smart move for an innovative company like Biofrontera to protect its intellectual property through patents.
So, it makes sense that Biofrontera would seek U.S. patents covering its high-conviction products like Ameluz and BF-RhodoLED. And in fact, that’s what Biofrontera’s wholly owned subsidiary, Biofrontera Pharma GmbH, recently did.
According to a press release, the subsidiary “received a notice of allowance from the United States Patent and Trademark office (USPTO) with respect to the patent application “Illumination for Photodynamic Therapy.”
Biofrontera CEO Hermann Lübbert explained that this event “is an important part of Biofrontera’s patent strategy to further protect” Ameluz together with BF-RhodoLED and its successor model, RhodoLED XL, in the U.S.
With that, Biofrontera should be better positioned to solidify its niche-market foothold. Lübbert added that, “Patent protection on either part of the FDA-combination approval increases our competitive advantage and is likely to hinder generic competition in the US market.”
A Path to $20?
The patent-related news is significant for Biofrontera. Yet, interestingly enough, it’s not what caused BFRI stock to jump recently. Rather, the catalyst was an ambitious price target set by a prominent Wall Street expert.
Reportedly, Roth Capital analyst Jonathan Aschoff initiated his coverage of Biofrontera with a “buy” rating and $20 price target. In early December, that represented a multi-bagger return on investment.
Apparently, Aschoff analyst believes that Biofrontera will “meaningfully increase” its Ameluz revenue in actinic keratosis as it substantially increases its U.S. sales effort.
Moreover, the analyst evidently views Ameluz’s clinical data as superior to its peers. That’s a fair assessment, but investors need to be realistic. This $20 price target is just one analyst’s prediction.
It’s probably best to start with a small long position in BFRI stock. Even if you agree with Aschoff’s assessment of Ameluz’s clinical data and revenue-generating potential, caution is still advised.
And, let’s just see if the stock can get back to $10 first, before eyeing $20.
The Bottom Line
In general, it’s wise to maintain only small positions in biopharmaceutical stocks as they can be volatile. BFRI stock is a perfect example of this, as the shareholders have been taken on a virtual roller-coaster ride. Still, picking up a few shares might not be a bad idea.
Moreover, with a patent that can enhance the company’s market footprint and income stream, Biofrontera might just be poised for a turnaround soon.
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.
