Back on October 24, we published this piece on HTG Molecular Diagnostics Inc (NASDAQ:HTGM). At the time, the company had just outlined its intentions to hold a conference call and, in turn, to put forward an operational update to shareholders as part of the call in question, and was gaining strength on the back the news.
As part of our coverage at that time, however, we suggested that this was just the start of what could potentially be a much larger upside revaluation and, by proxy, we suggested that a position at then-current levels could be a smart entry point heading into the close of the year.
Fast-forward to January 2018 and we just had our thesis validated.
Over the last couple of weeks, the company put out two major updates and both have resulted in some upside momentum for HTG Molecular Diagnostics’ market capitalization.
Right now, HTG goes for around $3.40 a share. Back in October, when we covered the stock and suggested there was some upside on then-current pricing, the company went for around $2.70 apiece.
That’s a more than 25% run.
So what comes next?
Well, in order to answer that, it’s worth taking a quick look at the two developments in question that have pushed the price to current levels.
First, the company announced a fresh master agreement with Merck & Co., Inc. (NYSE: MRK), which represents the third of three such agreements, with the other two being set up with Qiagen NV (NASDAQ: QGEN) and Bristol-Myers Squibb Co (NYSE: BMY). These agreements are designed to underpin the development of next-gen sequencing-based companion diagnostic assays and the Merck announcement serves to provide further validation that this technology really could be a game changer not just in this sector but for the diagnostic space as a whole and, in turn, could really drive value appreciation for HTG longer-term.
That’s the first development.
The second development is rooted in something we highlighted in our previous coverage as being key to near-term growth – the ongoing submission of an application for pre-market approval, or PMA, for the company’s ALKPlus assay.
Back in October, the third part of a four-part submission had just been lodged with the FDA and we pointed to the fourth and final part’s submission as being a potential near-term catalyst for the company as and when it hit the press.
And while we haven’t seen any submission announcement just yet, management reported in its most recent update that it expects to have the fourth part of the rolling submission with the agency at some point during the second quarter 2018.
This is a rolling submission, meaning the FDA has likely already assessed the first two (and potentially the first three) elements of the application. In turn, once the fourth submission is in place, the company could be looking at final feedback (and, with any luck, a regulatory approval) within a few months or a couple of quarters at the outside.
So, let’s get back to our initial question, what comes next?
Put simply, we think there’s plenty more run room in this one between now and the end of the year. The above-mentioned second-quarter submission is a major catalyst and, subsequent to that news hitting press, the FDA decision could really get the stock moving towards and beyond the $5 mark if and when it happens.
Keep in mind that there is some degree of near-term dilution potential given HTG’s current cash position but it’s far from prohibitive to an exposure at current prices and any upside that comes on the back of the above-outlined developments should quickly negate any value lost through the announcing of an equity issue.
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Image courtesy of mathew lippincott via Flickr
Disclosure: We have no position in HTGM and have not been compensated for this article.