Friday, 2 October 2020

Solid Biosciences Is Another Sarepta With 200% Upside After FDA Lifts Clinical Hold On Its DMD Therapy

Solid Biosciences Inc. (SLDB)
Current Price: $4.18
Target Price: $12.50
Upside Potential: 200%
Market Cap: $193 million
Shares Outstanding: 46 million
Float: 16 million

We are putting a bullish trade alert on Solid Biosciences Inc. (SLDB). We are up to 920 followers despite not giving out a lot of alerts, a fact that we think is indicative of a successful, diligent and prudent stock picking history. If you like our picks you can follow our blog by clicking the follow button on the top of the left hand panel as well as follow our Small Caps, Big Gains blog where we put up our Canadian picks. You can also follow us on Twitter @StockTradePicks which has over 4,600 followers.











Back in November 2019, the FDA put a clinical hold on SLDB's IGNITE DMD Phase I/II clinical trial SGT-001. SLDB immediately gapped down from $11.00 on November 11 to $2.82 the next day. On October 1, the company announced that the FDA lifted this halt and that it will start dosing patients again in Q1 2021. The stock rallied 70% to $3.46 on Thursday on nearly 200 million shares traded, though it did pull back significantly from its $6.10 day high. While many day traders exited the stock at a loss, it moved up another 21% to $4.18 on Friday. After hours activity on SLDB was very bullish, with the stock moving up as much as 17% to $4.90:








SLDB is very bullish from both a technical and fundamental standpoint. It has a major gap to fill between $6.10 and $11.00 and logic would dictate that if it dropped from $11.00 prior to the FDA hold, then it should return to that level now that the hold is lifted. Chardan Capital Markets increased its target price on SLDB to $12.50 from $5.00 on the news, citing the following: 

Chardan Capital Markets analyst Gbola Amusa raised the price target on Solid Biosciences (NASDAQ: SLDB) to $12.50 while maintaining a Buy rating after the FDA lifted the clinical hold on the phase I/II IGNITE DMD trial of AAV9-based gene therapy (GT) SGT-001 in Duchenne muscular dystrophy (DMD).

Amusa commented, "Today's news is an important positive, given: (1) manufacturing constraints in the space leave an opportunity for Solid, and (2) the view from many in the market that SGT-001 may not return to the clinic. In our 9 May 2020 research, we noted a resolution of the clinical hold could be a catalyst for performance. The clinical hold resolution shows management has communicated in a transparent fashion and has put SGT-001 back on course."

We think this is solid reasoning and are also adopting the $12.50 price target. Though the analyst also noted that "Duchenne muscular dystrophy is a "vast opportunity" for gene therapies, and one that could take Solid "significantly past" the new price target with progress". The analyst believes that the stock could reach as high as $50. SLDB could become another Sarepta Therapeutics, Inc. (SRPT), which is trading at over $10 billion market cap. SRPT is well-known for its Duchenne muscular dystrophy therapies with shareholders being rewarded with more than a 1000% return in 10 years. 

What makes DMD therapy stocks so special is that they are the beneficiary of a very vocal special interest group. Boys who are afflicted with the disease and their families are very aggressively in support of any kind of novel solution to combat it. DMD is a very debilitating condition that destroys quality of life and usually results in early death at around 20 years old. Therefore the DMD community is very much in favor of fast approval of any kind of therapy as soon as possible because 1. It's a race against time for these young men and 2. Given the severe nature of the disease, there is little need to worry about side effects as it's nearly impossible for those side effects to be worse than letting the disease go on untreated. Even if the therapy is no cure, as long as it can provide some kind of improvement in the quality and duration of life for patients, it's worth it.

SLDB is in the unique position of being one of the few handful of companies out there that's able to use gene therapy to combat rare diseases. Diseases that are so severe that any kind of improvement at all will result in a tremendous push to approve the therapy. With a market cap of under $200 million, SLDB is over 50 times smaller than SRPT. It's pretty easy to understand why this stock could go on a major run. 

Disclosure: We are long SLDB


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