Chardan's Take On Axovant, Avalanche & VistaGen

Editor's note: A previous version of this article said Chardan held a $10 price target on VistaGen. This information was incorrect and has been removed. The firm holds a $50 price target on the stock.

A new report out this week by Chardan Capital Management focuses on three biotech stocks that the firm has been watching lately. Chardan analyst Gbola Amusa gives his take on the recent developments at each company and how traders should play the stocks.

Axovant Sciences Ltd AXON

Amusa believes that the market’s expectations for RVT-101 are way too high. Amusa sees potential exclusion criteria and fierce competition as limiting factors when it comes to the potential of RVT-101.

“In addition to consensus not adequately modeling RVT-101’s late-stage and 5-HT6 antagonist competition, we believe consensus does not yet appreciate the potential for a narrower label for AXON’s compound,” Amusa explained. He notes that the the FDA has not approved a single new molecular entity (NME) for treatment of Alzheimer’s disease since 2003. Chardan has a Sell rating on Axovant’s stock.

Avalanche Biotechnologies Inc AAVL

Amusa sees good news and bad news for Avalanche following the unexpected resignation of CEO Thomas Chalberg. The bad news is that Chardan has no choice but to interpret the departure as an indication that phase IIa data for AVA-101 fell short of expectations, a conclusion that supports Chardan’s fears that Avalanche’s gene therapy approach to ophthalmology is flawed.

However, the good news for Avalanche is that the company’s large cash position and slow cash burn allow it the freedom to choose to redirect its focus if such a decision is required. Chardan has a Neutral rating on Avalanche and a $17.50 target for the stock.

VistaGen Therapeutics Inc VSTA

Allergan PLC AGN’s recent acquisition of VistaGen competitor Naurex is an indication to Amusa of the potential of NMDAR receptor treatment. “We believe VSTA if successful would arrive with the first oral NMDAR product for depression,” Amusa explained in the report. Chardan has a Buy rating on VistaGen with a $50 price target.