AN2 Therapeutics stock upgraded by JPM Securities on drug path clarity

On Tuesday, AN2 Therapeutics (NASDAQ:ANTX) stock saw an upgrade from Market Perform to Market Outperform by JMP Securities, with a new price target set at $6.00.

The decision comes after a recent meeting with the FDA and encouraging Phase 2 results for the company's drug epetraborole, used in treating MAC NTM, a rare lung disease. JMP Securities based the upgrade on a risk-adjusted, discounted cash flow analysis.

AN2 Therapeutics reported its FY23 results last week, highlighting a strong cash position of $134.5 million. The company's management has indicated that this amount should sustain operations for at least the next 12 months. With the Phase 2 results for epetraborole expected in August and an upcoming FDA meeting, there is optimism for a clearer development path.

The company has temporarily halted enrollment in the Phase 3 study of epetraborole, pending further insights into the drug's potential efficacy. This pause has affected the stock's performance, with shares trading down. However, JMP Securities believes that the current valuation does not reflect the potential of AN2 Therapeutics, especially considering the multiple avenues the company could take moving forward.

Despite the uncertainty surrounding epetraborole's approval, JMP Securities has accounted for the risks, estimating a 25% probability of the drug gaining approval. The firm's $6 price target reflects a belief that the stock is currently undervalued, taking into account the company's cash position and the prospects for its lead drug candidate.

Following the recent upgrade by JMP Securities, AN2 Therapeutics (NASDAQ:ANTX) shows a mix of challenging financial metrics alongside potential stock momentum. The company's market capitalization stands at a modest $111.83 million, reflecting a niche player in the biopharmaceutical industry. ANTX's P/E ratio is currently negative at -1.73, indicating that the company is not generating profits as of the last twelve months ending Q4 2023. This aligns with the reported operating loss of $69.64 million and a significant Return on Assets of -53.65%, underscoring the high-risk nature of investing in AN2 Therapeutics at this stage.

However, recent price movements suggest some investor optimism, with a 20.51% one-week total return and a 25.33% increase over the past month. This could be attributed to the positive sentiment following the company's interactions with the FDA and promising Phase 2 results. Despite this, the stock has experienced a substantial decline over the past three and six months, and it currently trades at only 16.92% of its 52-week high.

InvestingPro Tips highlight that AN2 Therapeutics is scheduled for its next earnings report on May 8, 2024, which could provide further insights into the company's financial health and the progress of epetraborole. Additionally, with analysts setting a fair value estimate at $7.00 and InvestingPro's fair value at $4.73, there appears to be a divergence in valuation perspectives, suggesting that investors should closely monitor the upcoming earnings and any developments regarding the company's lead drug candidate.

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