Summary
- Melinta Therapeutics stock rockets as a result of BAXDELA's sNDA being accepted by the FDA for a priority review.
- The company was given a PDUFA date of October 24. This expedited review could set up to be a good trade and/or long-term hold.
- I provide some reasons to hold Melinta stock going into the PDUFA and potentially beyond.
- I review some of the major downside risks that investors need to be cognizant of when looking to enter a position in Melinta.
On June 19th, 2019 Melinta Therapeutics (MLNT) announced the FDA accepted its BAXDELA sNDA for priority review. This sNDA would expand BAXDELA's label to include adult patients with community-acquired bacterial pneumonia (CABP). The FDA gave BAXDELA a 6-month review cycle and a PDUFA date of October 24th. Melinta traded up over 200% on June 19th after the company press release, which caught me a bit off guard. Typically, when a stock rises this much, it is due to a potential buyout or a pump dump. It took to the middle of the trading session for some analysts to start weighing in on the move and what the approval meant for Melinta. Sadly, most analysts saw this move an overreaction and reiterated weak price targets. Admittedly, I was surprised by the size of the move, but I wouldn't say the move was an overreaction considering the stock is still down over 80% for the year. A Jeffries analyst downplayed the significance of an approval pointed to an estimated peak sales of $133 million in 2028. Indeed, that is not a blockbuster indication, but Melinta's market cap was only ~$23 million before the press release, so I wouldn't downplay the impact of the sNDA.
I intend to discuss whether or not this sNDA move was an overreaction. In addition, I provide a couple of reason why investors should hold their shares and also potential downside risks for those looking to enter at these prices.
Image Source: Melinta
