On Wednesday, Craig-Hallum assumed coverage on shares of DiaMedica Therapeutics Inc. (NASDAQ:DMAC) stock, issuing a Buy rating with an $8.00 price target. The firm's analyst highlighted the potential of DM199, DiaMedica's lead product candidate, for the treatment of acute ischemic stroke (AIS) patients, drawing parallels to its efficacy from similar treatments used in China.
The analyst expressed confidence in DM199 becoming a blockbuster drug, projecting peak sales to reach $2.8 billion by 2033. This optimistic forecast is based on the extensive use of urine-derived KLK1 in treating over one million AIS patients in China, coupled with previous data supporting the drug's mechanism. The current market valuation of DiaMedica, according to the analyst, does not reflect the blockbuster potential of DM199.
The current treatment landscape for AIS is dominated by Activase (Alteplase, commonly known as tPA), which generates over $1.3 billion in annual sales despite being used in only 5-8% of AIS cases. DM199 could significantly impact this market, offering an alternative to improve patient outcomes in the acute setting.
The pivotal trial's success is a point of contention among investors, with the share price seemingly indicating less than a 10% chance of success. However, the analyst at Craig-Hallum believes that the probability is closer to 25%. The firm suggests that investors consider whether the potential rewards of DM199's approval, given its clinical validation in China and the low chances of success currently priced into the stock, offer a compensatory risk-reward scenario.
In conclusion, the firm's new coverage and price target reflect a belief that DiaMedica's stock could see significant upside if DM199 is approved, given its potential to become a blockbuster treatment for AIS.
InvestingPro Insights
In light of Craig-Hallum's optimistic coverage on DiaMedica Therapeutics Inc. (NASDAQ:DMAC), current financial metrics from InvestingPro provide additional context for investors. DiaMedica's market capitalization stands at approximately $91.86 million, indicating a modest company size that could be poised for growth upon successful clinical outcomes. Despite a challenging financial performance with an adjusted P/E ratio for the last twelve months as of Q4 2023 at -4.74, the company holds more cash than debt, which is a positive sign of financial stability. The fact that DiaMedica does not pay dividends is common for companies focusing on reinvesting earnings into research and development.
InvestingPro Tips suggest that DiaMedica is experiencing volatility in its stock price movements, with a one-year price total return reaching 49.38%, reflecting the market's response to the potential of DM199. However, with analysts not anticipating profitability this year and a projected net income drop, investors should weigh these factors when considering the company's future. Additionally, DiaMedica's liquid assets exceed its short-term obligations, providing some cushion for its cash burn. For those interested in a deeper dive into DiaMedica's financials and future prospects, InvestingPro offers additional tips, with a total of 9 tips available to help investors make informed decisions. Remember to use coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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