Small-cap biotech stocks are known for the inherent risk they present to investors, as it is impossible to…

Small-cap biotech stocks are known for the inherent risk they present to investors, as it is impossible to predict whether the company’s proposed solutions – be it prophylactic, therapeutic, or diagnostic – will make the grade in clinical testing. However, get your biotech choice right, and the returns could be phenomenal.

Which brings us to Aclaris Therapeutics (ACRS). The stock closed out Tuesday’s session with an extra 220% of share gains attached to its ticker, as the market cheered a successful clinical trial’s outcome.

Specifically, the company released preliminary results from the phase 2a clinical study of ATI-450 in patients with moderate to severe rheumatoid arthritis (RA). Over a 12-week period, the investigational oral MK2 inhibitor demonstrated a noticeable and continuous reduction in disease-activity scores. Overall, the drug was well tolerated, with no significant adverse events noted during the trial.

Aclaris plans to publish a full analysis of the clinical trial results in a peer-reviewed scientific journal.

For Leerink analyst Thomas J. Smith, the positive results exceeded his expectations.

“The Phase 2a trial showed that not only was ATI-450 generally well tolerated, but that treatment rapidly and durably improved multiple endpoints and biomarkers through 12 weeks relative to placebo,” the analyst said. “We are increasingly encouraged by the profile of this potential first-in-class/best-in-class, oral disease modifying therapy in RA, as well as across a broader range of inflammatory diseases.”

The analyst gives ATI-450 a 40% probability of success, and estimates that for the treatment of RA, ATI-450 can attain $1.3 billion in “unadjusted peak worldwide revenue,” following a projected 2026 launch.

With other candidates in the company’s pipeline acting as further catalysts, Smith believes a “sustained news flow is likely to keep investors engaged, as ACRS solidifies its Phase 2b study plans for ATI-450 in RA.”

As a result, Smith boosted his price target significantly, which shifts from $4.5 to $21. Following Tuesday’s unseemly gains, the new target suggests room for a modest 9% upside. To this end, the analyst’s rating stays an Outperform (i.e. Buy.) (To watch Smith’s track record, click here)

Only one other analyst has recently posted an Aclaris review, also suggesting investors to Buy. Therefore, the stock has a Moderate Buy consensus rating. (See ACRS stock analysis on TipRanks)

To find good ideas for healthcare stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
Credit: TipRanks

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