3 Small Biotechs Worth Watching Over The Next 6 Months

Includes: AHRO, CNAT, TNXP
by: The Behavioral Economist

Three potential biotech investments are presented. Each is a small company, operating at the clinical phase, with events of note transpiring over the next 6 months.

These companies are each presented in a brief synopsis format which encourages readers to continue their own due diligence, and links to other articles worth reading as well.

Overviews of these three companies are presented from the values and perspectives deemed congruent with the authors own investment criteria and expectations.

Each opportunity is presented with a clear price target and an applicable investment horizon.

In the equities market, the word "biotechnology" is often either embraced as an instrument of creating wealth, or shunned as a reincarnation of fool's gold. Perhaps more than any other sector, biotech maintains a following comprised equally of romantics and cynics. The "romantics" believe with unequivocal devotion. The "cynics" criticize with unrelenting resolve. It is a constant tug-of-war between two similarly confident groups.

In the large cap space these battles are less prevalent. However, in the small-cap, micro-cap, and clinical phase segments of the sector, these types of battles and disparities reign supreme. The currencies traded in these segments are hope and potential. Thus, like with nearly all abstractions, there is a level of subjectivity which dictates valuation and expectations. These stocks attract the optimists, the risk tolerant, the speculators, and the gamblers. These stocks possess the ability to significantly increase, or devastatingly reduce, an investor's capital position in a single moment. This is a segment of the market not to be visited by the faint of heart.

This article is going to appeal to the courageous. It is potentially going to be of value to the bettor, the visionary, and the risk taker. This piece is worth reading for those of you with a penchant for opportunities defined by measurable risk and enticing reward. Presented herein will be three companies. Each of them will be speculative, clinical phase, small or micro-cap biotech's, with upcoming data releases capable of causing rapid and noteworthy appreciation. Each will be identified clearly, and will offer an applicable price target in correlation with an appropriate investment horizon. A brief synopsis of each company, its lead drug candidate, its forthcoming data, and its associative risks, will also be included.

Without further ado, let's examine each of these companies and the opportunities each of them present.

Tonix Pharmaceuticals (NASDAQ:TNXP)

Current Market Capitalization: $147 Million

Outstanding Shares: 10.6 Million

Current Price Per Share: $13.87

Price Target: $35.23

Investment Horizon For PT: 90 Days

Tonix Pharmaceuticals is a New York based biotechnology company currently developing its lead candidate, TNX-102 SL, for two indications; Fibromyalgia and Post-Traumatic Stress Disorder. Each of these indications represents a significant market, with largely unmet needs, which are defined by similar adversities and obstacles.

At their cores, both of the aforementioned indications, FM (fibromyalgia) and PTSD (post-traumatic stress disorder) are lifestyle diseases which are related by comparable day-to-day challenges. Lack of sleep, pain, distractive preoccupations, and unrelenting anxiety are prevalent in both. They are referred to as "lifestyle diseases" due to their effects on, and hindrances to, one's day-to-day life. The ability to constructively participate in one's marriage, successfully hold down a job, and/or maintain any personal relationships with family or friends, are often compromised with such ailments. As a result, functionality can become elusive.

TNX-102 SL is a relatively simple, albeit ingenious, potential solution to these problems. It is a low dose, sublingually delivered, reformulated version of cyclobenzaprine; a muscle relaxer used most often in diseases associated with skeletal muscle spasms and acute pain. The drug has an exceptional safety record, but has also been known to maintain only short term efficacy (less than three weeks). However, much like the most relevant side effects (dry mouth and drowsiness), the efficacy issue could be resolved by controllable dosage, transport, and frequency. If small doses, delivered sublingually, can be better controlled and better tolerated, then they could be taken daily without the naturally biologic consequence of the drug building up in one's system as a proponent of lethargy and assimilation. This could lead to faster onset, less side effects, and a more rapid and comprehensive passing of the drug through one's system.

TNX-102 SL strives to achieve each of those standards, all the while providing one key element; a regular, predictable, and restorative night of sleep. The company is awaiting top line data results from a phase 2b clinical trial, known as BESTFIT, designed to target FM. These results are expected to be delivered no later than October. These results will detail the efficacy of TNX-102 SL as a daily treatment taken at bedtime, designed to assess average daily pain over the following 24 hours, measured over a treatment course of 12 weeks. This is a double-blind, randomized, multicenter, placebo-controlled study. Assuming the data is positive, the impact on the company's current valuation could be explosive.

Reason for optimism is widespread. Not only is company leadership highly capable and fire tested, but the previous 2a study demonstrated noteworthy improvements in core FM symptoms such as pain, tenderness, fatigue, and depression. Moreover, there were statistically significant correlations drawn between restful sleep and treatment efficacy. The current 2b study, BESTFIT, for which top line data is pending, should only further improve upon these previous findings. The sublingual delivery is expected to be well tolerated, more easily absorbed, and more simply processed. Moreover, since BESTFIT is a longer study, with a greater number of enrolled subjects, treatment value and efficacy should be even more prevalent given enrollment and duration. Hence, the likelihood of success is extremely high.

The question then becomes whether or not this likely success is already priced into the current valuation. That answer is, by any reasonable estimation, absolutely not. Fibromyalgia is, in accordance with Tonix own estimations, no less than a $1.4 billion domestic market. This is a market which, as it currently stands, is dominated by leading drugs Lyrica and Cymblata. However, each of those treatments come with oft complained about side effects; among them are complaints such as lethargy, depression, dry mouth, headache, and nausea. As patients in this space are frequently willing to explore new treatment options, Tonix has every reason to expect a receptive patient population if and/or when TNX-102 SL eventually gets to market. These factors will have to be considered in the market's response to potentially positive BESTFIT results.

Then, in the shadows, there is the PTSD consideration. While BESTFIT is not designed to be evaluating TNX-102 SL as a PTSD treatment, the comparable likeness of the ailments, and the intentions of Tonix to continue on its path to develop this candidate for the PTSD market, will be relevant. PTSD is estimated to be a $2.9 billion market by 2017. It encompasses 8 million patients, and is growing with alarming prevalence in military personnel. While companies such as Pfizer (NYSE:PFE) and GlaxoSmithKline (NYSE:GSK) have brought valuable drugs to market for this indication, it remains a space with growing need and plenty of room for viable, safe, and effective options. Cyclobenzaprine, the drug which is the foundation of TNX-102 SL, has shown to be actively binding to serotonin receptor 5-HT2a, a key driver in controlling serotonin signaling. The role of this receptor, the importance of serotonin singling, and the cognitive communication and emotional process of human behavior associated with such, indicate that TNX-102 SL could be effective as a sleep aid, and moderator of functionality, among the PTSD population. Therefore, a positive result in BESTFIT could demonstrate safety, efficacy, and tolerability not only for the FM space empirically, but in the PTSD space theoretically. The market won't ignore the correlation. Tentatively speaking, the impact TNX-102 SL may have on the PTSD space could be even larger than the FM space.

So, when it comes to valuation, the possibilities are nearly endless. In an effort to be conservative, this article will look forward without any consideration of CAGR, and will assume a blanket discount of 40% for differences in methodology. So then, the assumption herein is that positive results from BESTFIT could project peak sales of TNX-102 SL at $560 million in the FM space. That assumes capturing of 40% of a $1.4 billion market ripe with expiring patents, side-effect ridden treatments, moderate safety concerns, and a receptive patient population. Thus, driven by the factors cited herein, TNX-102 SL should forecast to no less then aforementioned peak sales.

In consideration of the PTSD space, and its 8 million patients, there will also be considerations. Predicated on the relationship between cyclobenzaprine and 5-HT2a, as well as the expected tolerability, safety, and efficacy of TNX-102 SL, capturing just over 20% of the PTSD market, or approximately $600 million in peak sales, appears equitable. PTSD requires treatments; new, safe, effective, life changing, paradigm shifting, treatments. TNX-102 SL has that sort of potential.

Assuming that the BESTFIT trial reports positive data, the market should respond not only to the drug as a candidate for the treatment of FM, but also for the overlapping treatment in PTSD. Depending on what degree of success the data represents, this impact could be wide ranging. Obviously, at this time, given the outcome measures of the BESTFIT trial, the most viable considerations to valuation will be predicated on the FM space. Nonetheless, it is reasonable to assume that the PTSD space will affect valuation based on BESTFIT results. Assuming positive data, the probability of market capitalization meeting $372 million, with the possibility ranging all the way up to $696 million, is the estimation this article commits to. Those numbers are predicated on strong data, forecasting peak sales numbers indicated above, discounted back 40% for continued development and uncertainty, and calculating PTSD sales ranging anywhere from 10% consideration, to 100% consideration (less 40% discount), depending on how Mr. Market responds. This also calculates only a 1X multiple on forecasted sales. That would place an applicable price target on Tonix shares, assuming the low end of projections, to $35.23 per, based on a probable market capitalization number of $372 million, and a variable deviation of 1%.

As far as the risks associated with initiating a position in Tonix at current levels, it's pretty simple. The projections herein have nothing to do with the long term picture of the company (although that outlook should be positive as well), and therefore, concerns over dilution or the prospects of a partnership or buyout are inadmissible for this particular article. The risk here, as it stands with the applicable price target detailed, is twofold. First, if the company were to report failure from BESTFIT, the stock price would obviously react accordingly. With nearly $50 million in cash, and any failure likely only being a product of dosage or delivery, the price would simply decline, not completely collapse. Shares could potentially fall to the $6-$8 range. As to the second concern, it would be "underwhelming data." In other words, perhaps the trial meets outcome measures, but does so with some ambiguity. In such an event, shareholders awaiting BESTFIT results, strictly as a catalyst trade, would simply exit the stock, and move onto the next potential homerun. In such an event, the price would likely fall to the $9-$11 range and reside there anxiously until additional guidance was provided.

Nonetheless, this article contends that BESTFIT results have a high probability of reporting positive data by October, and that the market response should lead to a share price of $35.23 shortly thereafter. For further insights, details, and projections pertaining to Tonix, it is recommended that readers consider the contributions of Seeking Alpha All-Stars Joe Springer and Jason Napodano.

Conatus Pharmaceuticals (NASDAQ:CNAT)

Current Market Capitalization: $98 Million

Outstanding Shares: 15.7 Million

Current Price Per Share: $6.35

Price Target: $19.11

Investment Horizon For PT: 3-6 Months

Conatus Pharmaceuticals is a California based biotechnology company developing its lead candidate, Emricasan, for multiple indications across the spectrum of liver disease. The company is entering into a key stretch of its history, and will undoubtedly be defined by what occurs over the next 6 months. However, in order to best understand the possibilities unfolding over the next half a year, one must first understand Emricasan as a drug candidate.

In a recent discussion with Alan Engbring, the head of Corporate Communications at Conatus, there was a clear theme to our discussion; versatility. From an investment standpoint, the versatility and multi-purpose potential of Emricasan is what makes Conatus such an enticing investment vehicle. It is also, quite frankly, why Dr. Steven Mento, the CEO of Conatus, has spent the better part of a decade fighting for Emricasan to get to market. The path has not been easy; however the potential of the drug has never been in question.

Emricasan is a caspase protease inhibitor. That is to say, it is a drug which can influence the key effector molecules which determine the process of apoptosis (physiological cell death,) as well as control the rate of inflammation and expansion. By inhibiting the factors which contribute to the dispersion of these issues, Emricasan could, theoretically, minimize them. By limiting the effects and consequences of apoptosis and inflammation, Emricasan directly treats the two principal foundations of nearly all liver disease manifestations. As a result, the drug maintains the potential to become one of the most versatile and universally applicable treatments available to liver disease patients.

So great, in fact, has the potential of Emricasan been, that pharmaceutical giant Pfizer purchased the compound in 2005 from Idun Pharmaceuticals (where Dr. Mento had originally developed it) with the intention of developing the drug for use in post-liver transplant patients. However, three years after the acquisition, Pfizer abandoned its Emricasan program after having encountered repeated safety issues which concerned the FDA. These issues were related to the observation of inflammatory infiltrates in the organs of a particular strain of transgenic mice intended to be used in a planned carcinogenicity study. Pfizer felt, apparently, that the efforts and costs which would have been required to clear such issues were better applied elsewhere in its developmental pipeline. The development of Emricasan was then put on clinical hold.

In 2010 Conatus purchased Emricasan, with the intention of allowing the compounds founding developer, Dr. Mento, to lead the drug to market. Conatus conducted a thorough review of all applicable data from Pfizer and the FDA, including the commissioning of independent experts, and put together a pathway plan. Working alongside the FDA, with clear objectives and concerns well defined, Conatus began its course of study and action. It was determined that the infiltrates which had caused abandonment of the program at Pfizer were, in fact, not pre-cancerous. The FDA agreed to allow Conatus to conduct its own carcinogenicity study to validate the research findings. The study was completed in 2012, and the results were as expected. Treatment over 26 weeks did not result in an increase of tumor incidence in transgenic mice (the same type of study which had long proven to be an obstacle at Pfizer). Emricasan was, for lack of a better phrase, "back in the game." The clinical hold was lifted. Further details regarding these events are available in this article.

Since then, Conatus has been engaged in multiple trials for Emricasan. Acute-on-Chronic Liver Failure, Chronic Liver Failure, Post-Liver Transplant Patients (originally Pfizer's interest), and Nonalcoholic Steatohepatitis (often referred to as NASH) are currently being examined as possible indications to pursue. While the majority of the excitement in the retail investor universe as of late has been surrounding NASH, it is in fact in other indications where the nearest and most consequential impact could come. It is in indications such as ACLF (Acute-on-Chronic Liver Failure), and others where survival rate weighed against the probability of fatal consequence is measured, where success is more definable and more assuredly probable. This is, undoubtedly, why in a recent conference call the company opted to delay NASH results in favor of focusing energy on other indicative developments.

As was verified in recent discussions with Mr. Engbring, the pathways and opportunities currently being pursued by Conatus are, in fact, in the clear best interest of investors. The company is focused immediately on indications and ailments which allow them to meet two fundamental prerequisites; (1) pursuing regulatory pathways that have clear definitions at the FDA, which increases the probability of late trial success and approval, and (2) focusing on dire illnesses, with the possible consequence of death being front and center, in order to capture the attention of the FDA, enrolled patients, and the medical community. NASH, while enticing and a point of focus, doesn't meet those two criteria, respectively. Thus, the delay of NASH results is a non-issue, whereas the anticipation of top line data later this year from trials such as the pharmacokinetics study in ACLF should be of great interest.

Moreover, the company recently filed an S-3 to register a potential $150 million offering. This news should also have been embraced. The company has said on multiple occasions that they intend to bring Emricasan to market on their own, if the opportunity to do such presents itself. This filing not only would provide access to capital capable of funding that objective, but it also is a sign of confidence at Conatus. It is clear the company is preparing for, what they anticipate to be, positive trial results. After all, each of these existing trials represents a potential indication to pursue at the phase 2b and/or phase 3 levels, and with a registered shelf they are in position to pursue such without delay if applicable. All of these decisions, according to Mr. Engbring, are not only judicious and confident, but also in the best interest of shareholders. This article agrees.

Over the next 3-6 months Conatus will announce top line data from multiple trials. Each trial represents a step further in the process of bringing Emricasan to a huge market. Liver Disease, in its all-encompassing entirety, should be a $14.2 billion dollar market by 2016. ACLF affects nearly 250,000 patients. Chronic Liver Failure affects nearly 800,000 patients. NASH, and Non-Alcoholic Fatty Liver Disease, affects a combined 175 million people. The list, quite frankly, goes on and on, and further statistics are available on the Conatus website. The point here is that from current levels, Conatus doesn't need to report positive data from all of its ongoing trials to be a highly lucrative investment. Instead, clear indications of promise in any one indication would see noteworthy upside possible. In ACLF for example, where mortality rates are alarmingly high, ICU admissions alone cost upwards of $3 billion per year. Any positive indication from the forthcoming data in the ACLF trial at Conatus could easily constitute a market capitalization number of $300 million; essentially 10% of the ICU admissions costs rated at 1X projected sales without any applicable discount or CAGR considerations. At $300 million Conatus shares would be priced at $19.11 per, which is the fundamental basis for the price target provided herein. The omission of a discount is in consideration of other possible indications, such as NASH, providing positive data in the provided investment horizon window.

The fact of the matter is we know what Emricasan is designed to do; it slows/minimizes/ reduces/controls apoptosis and inflammation. Therefore, whether allowing the human body's natural immunological response to function more efficiently, or simply bettering survival rates and extending survival duration, there is an essential need which Emricasan can fill in the space. As a result, given the drugs history and versatility, there are multiple pathways to market which could be pursued. Hence, the multiple ongoing trials.

In terms of risk, it is only fair to say that there are noteworthy concerns associated with an investment into Conatus. First, there has been little data to date regarding Emricasan efficacy. Yes, there have been multiple carcinogenicity studies, multiple examinations into safety and mechanism functionality, and loads of data pertaining to application of the drugs mechanism, but it has yet to be on "full display" in a human trial. These next 3-6 months will offer further insight into such questions. Secondly, there is the skepticism which surrounds the drug itself. Cynics will regularly cite that "if Pfizer gave up on it, it must be no good." While that perspective is wildly uninformative and comically shortsighted, there is some reasonable basis for the assumption (not the premise, but the assumption). When large pharmaceutical companies cease their investment into a compound, the market assumes the worse. Based on current valuation, it is safe to say that the market remains skeptical. Conatus has over $40 million in cash and cash equivalents, and expects to still be in possession of nearly $30 million by years end (in the event of no capital raises of course). At a market cap of only $98 million the market is valuing Emricasan at a measly $50-$60 million (give or take IP and other assets). For a $14 billion plus market, that isn't exactly a vote of confidence. Lastly, there is the S-3 registration. While this article maintains the perspective that it is a positive thing, it does indicate that positive results from any trial may well bring about dilution. Dr. Mento and Mr. Engbring have both stated that dilution, if it occurs, would occur at the highest possible price to minimize affecting the outstanding share count. Therefore, it is quite probable that any significant spike in price as a result of positive data would be followed by dilution shortly thereafter.

Nonetheless, this article believes that the science behind Emricasan is promising, and that the commitment from the team at Conatus is unrelenting. The drug is undervalued in the space as it stands currently due to its potential versatility, and with results forthcoming anticipation should be high. Whether positive results come from ACLF, NASH, anything in between, or everything in between, the next 3-6 months will define the company's foundation moving forward. Given cash and cash equivalents on hand, as well as the already abysmal market valuation, the downside from current levels could see shares fall to the $3-$4 range with universally poor results, or as high as perhaps $40 (assuming the unlikely scenario of no dilution) with universally positive results, over the next 6 months. Regardless, the price target here is $19.11, and the overall outlook is positive.

AtheroNova (OTCQB:AHRO)

Current Market Capitalization: $9 Million

Outstanding Shares: 4.74 Million

Current Price Per Share: $1.89

Price Target: $ 8.44

Investment Horizon For PT: 6-9 Months

The smallest, and perhaps most speculative, of the companies presented herein is AtheroNova; a California based biotech with extremely high ambitions tempered by a judicious and responsible approach to development. As detailed in a previous article, AtheroNova is attempting to bring a prospectively blockbuster drug to market. The company's lead candidate, AHRO-001 holds the potential to revolutionize the statin market. Yes, the terms "blockbuster" and "revolutionize" are bold words, but they are completely and utterly justifiable here; speculatively speaking.

For those readers whom are unfamiliar with statins, they are, as a class of prescribed drugs, the best selling drugs in history. Lipitor, Crestor, and Torvast are just some of the multi-billion dollar drugs which fall into the "statin designation." Statins are HMG-CoA reductase inhibitors which lower cholesterol. They are used by millions of people, and constitute a nearly $400 billion market including both direct and indirect costs. Existing statins essentially do two things; (1) lowers cholesterol, and (2) stabilizes plaque. However, AHRO-001 may be the first statin to not only lower cholesterol, but to also systematically break down and organically remove arterial plaque. If proven viable, AHRO-001 would represent a paradigm shift in treating atherosclerosis and all high cholesterol complications.

Admittedly, it is far too early to make any responsible declarations of potential market impact. However, in consideration of previous studies, it stands to reason that the assumption of a speculative position in AtheroNova is worth further examination. In 2011, AtheroNova presented data from a pre-clinical study which showed impressive medical response. AHRO-001, an intensely hydrophilic bile acid reformulated in tablet form, displayed, in a mouse model of cardiovascular disease, a 95% reduction in arterial plaque formation at the innominate artery when compared to the control group. Moreover, that same study showed a 65% reduction in plasma LDL-C cholesterol, a 70% reduction in intestinal dietary cholesterol absorption, a reduction in the inflammatory response of atheromatous lesions, and significantly improved ex vivo reverse cholesterol transport. It was, for lack of a better word, exemplary. However, it was also pre-clincal.

Currently, the drug is being examined in a phase 1 trial. It was, initially, an interventional study which was randomized and double blind, where the primary outcome measure was safety; assessing the tolerability and pharmacokinetics of AHRO-001 when administered first as a single daily dose, then gradually increased from daily dosing once, to twice daily for seven days. Study enrollment was originally estimated for 62 patients. Since its inauguration however, a 1b study has been added; designed to enroll 48 additional patients to assess the safety, tolerability and pharmacokinetics of AHRO-001 administered orally three times daily in graduated dosing to both statin treated and statin naïve, hypercholesterolemic individuals. The study will now evaluate lipid profiles, define gastrointestinal tolerability specifically, and determine pharmacokinetics of graduated dosing for active transport stimulation. It will also measure, in the applicable portion of the study population, the hepatic cholesterol synthesis and pharmacokinetics of the co-administration of a statin alongside AHRO-001. The company will remain blinded to the results from both the initial study, and the extended 1b study, until 1b is completed and data is compiled. Total enrollment for the entire phase 1 study (both 1a and 1b, respectively) is now estimated at 110. The company estimates, according to a July 30th announcement, that it will be approximately 6-8 months until top line data is released. Thus, top line data can reasonably be expected between January and March of 2015.

The company's current trial, which is being conducted and funded alongside its Russian partner CardioNova, is expected to bring about positive data. Mark Selawski, the company's Chief Financial Officer, stated previously (detailed in the article hyperlinked above) that the company is "extremely excited because we know our science is very good" and went on to say that the study in Russia had thus far "been going according to plan." Perhaps most valuable however, in the assessment of the potential market for the drug, is that even if broken down, and further dissected, the applicable market remains massive. Looking solely at the direct market for cardiovascular disease, without any complications, shows a $33 billion market. If one then narrowed it down even further, to only those patients whose current side-effects made existing drugs intolerable, the end result would represent 15% of that $33 billion market. That brings us to a $5 billion market of patients who are, more or less, untreated currently due to an inability to handle existing statins. So, AHRO-001 could, potentially, impact an unmet $5 billion market, as well as a competitive, albeit massive, $400 billion market. Assuming the data is positive, and assuming Mr. Selawski's previous optimism was well founded, the attention allocated to AtheroNova should begin to grow vigorously in 2015.

Currently, AtheroNova has a lot to prove. That fact is reflected clearly in the market's current valuation of the company. However, positive results from the ongoing phase 1 trial should bring about reasonable re-evaluation. Not only is the stock currently trading near a 52 week low, but it's market cap currently is reflective of little more than an idea. AtheroNova certainly has much more than that. With many popular statins having seen their patents expire in recent years, and having endured cheaper generics hitting the market, there is a huge opportunity for new statins; especially ones which reduce plaque through natural metabolic processes. This article contends that positive results from the phase 1 trial currently underway should be enough to value the company at $40 million (a meager .0001% of the total applicable market). That valuation would represent tolerability and safety of the compound in human patients correlated with pre-clinical indications from 2011. Then, leading into phase 2 studies, further appreciation at a rapid pace would likely take place. However, for the sake of this article, and the 6-9 month investment horizon, a $40 million cap appears more than reasonable. At the current outstanding share count that would price shares equitably, upon positive data, at $8.44 per.

Like most micro-cap biotech's, AtheroNova has its financial struggles. As of June, total cash on hand equaled only $319,779. Total assets were equally meager at $367,329. Meanwhile, current liabilities were reported at over $4 million. Despite the company having proven itself to be quite judicious in its spending, having spent less than $20 million thus far to advance its lead candidate, there will likely come a time when dilution is a necessary evil. While CardioNova remains involved in advancing AHRO-001, the fact of the matter is, raising capital will be inevitable between phase 1 and phase 2 trials. Therefore, potential investors need to function under the assumption of such an understanding. Also, in terms of risks, one cannot ignore the inevitable; AHRO-001 is in early stages, and will have plenty of opportunities to fail in the future (including, potentially, in its current safety trial). Funding is only part of the concern, as AHRO-001 has a long road to prove its safety and efficacy. If it were to fail now, at this stage, it's value would be nearly zero. Lastly, of course, there is what can be referred to as the "FDA conundrum." The FDA likes drugs that follow existing regulatory pathways. For AHRO-001, that could make its journey to market quite long. There has never been an approved statin which is readily labeled to be capable of reducing and/or removing arterial plaque. That is why, previously, Mr. Selawski mentioned the likelihood of pursuing approval as a statin to lower LDL cholesterol first, and then seeking validation later on, in perhaps post approval studies, of getting the drug designated as a reducer of plaque. Only time will tell. However, as it is applicable here, one must consider the markets assessment of the company in the immediate future. Hence, again, why the price target, and corresponding market cap, may seem conservative to some.

The AtheroNova story is an exciting one, and the potential of AHRO-001 is potentially explosive. A statin, that removes soft arterial plaque safely and predictably, would change the statin space. Nonetheless, we remain spectators to the drugs development in the very early stages. The price target provided herein is based strictly on anticipatory market response, and the probability of positive results from the phase 1 data. The 6-9 month expectation is congruent with those anticipations only. Thus, while the company does not have a history of dilution, any between now and then would obviously affect the projections herein. Regardless, this article does not foresee dilution between now and the time of data results as being probable. Therefore, positive results, and a positive market response equal to a valuation which dictates a share price of $8.44, are anticipated.


This article has presented readers with three small biotech's worthy of investment consideration. Each presents with different risk/reward ratios, and each is at a fundamentally different place in their pipeline development. Each company also operates in a different applicable space. Tonix Pharmaceuticals functions in the fibromyalgia and post-traumatic stress disorder space. Conatus Pharmaceuticals is intently focused on liver disease. AtheroNova is attempting to transform the statin space. Each of these opportunities presented is predicated on developments over the next 6 months (approximately), however obviously each story could venture well beyond that time line. Each of these companies, really, in terms of market capitalization, is in its infancy. Readers cannot lose sight of that fact.

Each opportunity presented herein has an element of risk to be considered. Not only should the risks identified in individual segments of this articles be weighed, but general risks such as competition, regulatory obstacles, and unforeseen potential adversity must always be measured. Each of the three investment opportunities presented herein could go well; or, adversely, all three could go bad. Time will dictate truth, but all investors must contemplate their own tolerance, objectives, investment horizons, and values individually. This article, obviously, is bullish on all three companies, but that perspective is compatible with the authors own values and risk assessments.

Clinical phase biotech investing is attractive to a certain type of investor. If you, the reader, are that type of investor, then each of these three companies is worth considering. Perhaps you'll only like one, perhaps you'll like two, or perhaps you'll hate them all. Either way, here are three ideas; do with them what you choose. Best of luck to all.

Disclosure: The author is long TNXP, CNAT, AHRO.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: AtheroNova was party to multiple paid stock promotions in 2011, where compensation was paid by way of restricted shares.

Editor's Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.