Vyne Therapeutics Inc (NASDAQ: VYNE) stock is up 23% premarket on the back of seeming momentum from analyst coverage. H.C. Wainright initiated coverage of Vyne and indicated a target price of $7 for the stock. This has led to a so far significant rerating of the price. The trading opportunity is, well, how far will this go? Or, will the effect fade away?
Vyne Therapeutics is a clinical research stage pharmaceuticals company specializing in topical treatments for skin problems and diseases. In common with all such companies, the major determinant is gaining FDA approval and license to market. Given the American system this also – near always – means that insurance companies will pay for the treatment. So, FDA approval not just allows marketing, it produces the ability for people to pay for it too.
The value of any specific drug or treatment – and thus of those developing it – depends upon the size of the addressable market. That, in turn, depends upon how many people have the problem, is it an ongoing treatment or a once-off cure? This then needs to be moderated by the probability, or likelihood, of FDA approval.
Different people can assign different probabilities to different parts of this equation. So, development-stage pharma companies are often volatile in price as opinions and calculations change.
The specific development here for Vyne is not that any of their treatments have reached a decision stage. Their main candidate at the moment is a treatment for acne vulgaris which is entering Phase II trials. That’s a big market which has little in the way of always useful treatment at present. So the value of successful testing and FDA approval is high.
What has changed is that the analytical firm, H.C Wainright, has instituted coverage of the stock. The estimation from the analyst there is positive, with a target price of $7 a share for the Vyne stock price.
Before this report Vyne stock was at the 90 cents, 91 level. It surged 26% on the day of the analysis release. It has since dropped back and advanced to close last night at the $1.37 level. This morning premarket it’s up another 23% to $1.70.
There appears to be some momentum behind this price rise. That’s the name for people simply seeing that it’s rising so they buy in – their doing so continues the price rise. It’s also possible that there’s a fundamental rerating of the stock going on as a result of the analyst coverage.
The question for traders is what happens next? It’s possible that the rerating continues as more come to share the re-evaluation of the drug pipeline. It’s also possible that the momentum trade aspect simply continues. Such a trade though does come to an end and there can be a significant fallback at the end of it. It’s even possible that this is just about to happen already.
That’s the fundamental basis of any possible trade here in Vyne. Is this a temporary phenomenon that will fade, or is it a step change and the beginning of a new and elevated level for Vyne’s stock price?
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