Investing

Leading Indicators Say Minerva Neuro Could Be Ripe For Another Short Squeeze

According to Fintel platform research, Massachusetts based clinical-stage biopharma company Minerva Neurosciences (US:NERV) could soon see another significant rally as a result of a short squeeze.

The stock that was trading more than -80% lower on a 1 year basis popped up on the radar after rallying more than 300% from mid to late August when the company announced that it had submitted a New Drug Application (NDA) with the FDA.

The news spurred a flurry of retail buying activity as the stock was discussed across various forums such as Reddit.

Minerva submitted the application for their Roluperidone (MIN-101) treatment for patients with negative symptoms of schizophrenia. The company is seeking approval for the 64mg dose of the drug.

Management stated that they believe the additional data and analysis shared with the government agency will further show that Roluperidone satisfies the criteria for FDA approval.

A decision from the FDA is expected to provide acceptance within ~60 days which suggests late October for the catalyst.

The company last submitted documents to the FDA back in April with the government voicing concerns around the study. The drug agency had requested further data and analysis which NERV’s management believes will now be satisfied.

Since rallying, NERV has shot up to the top of Fintel’s U.S. Short Squeeze Leaderboard with a score of 98.86. The score has been calculated by using a multi-factor quant model that includes the following attributes in the calculation.

NERV’s significant score is based on ~34% of the float being shorted, with short interest growing +785% in one month. The shorted stock currently has 4.66 days to cover with a borrow rate fee of 74.59.

A list of recent short sale transactions for NERV can be found – here.

A sharp rise in buying activity from here could drive a new significant share price spike as shorters will need to further cover positions. 

Following the news of the FDA submission, hedge fund Point72 disclosed a passive 8.8% stake in the company. The ownership filing gives a vote of confidence in the company by the fund manager.

More recently in September Minerva announced that they had filed a new mixed shelf worth $200 million. Additionally in the filing, NERV announced that they had entered a sales agreement with Jefferies investment bank to sell up to $22.6 million in common stock.

The stock funding will provide further liquidity to the existing cash balance of $49.9 million (announced during Q2 results) as the company advances its submission with the FDA.

Following the submission, analyst Douglas Tsao from H.C. Wainwright & Co exerted caution to investors as he believes there is some risk the FDS may continue to have problems based on previous interactions between the agency. However, Tsao notes that the NERV’s cash position should be sufficient to fund an additional Phase 3 study, if required and directed by the FDA. Tsao continues to recommend the stock as a ‘buy’ but previously reduced the price target from $40 to $24.

In general, NERV holds a consensus ‘overweight’ rating with an average target of around $30, which suggests +200% upside from the current price.

This article originally appeared on Fintel

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