Aclaris – FDA Approved Its First Drug, And What Now?
Summary
- ACRS has been bombarded by harsh SA articles over the last year and half, and, as a result, the share price has dropped by 25% from a year ago.
- Even upon the FDA’s approval of its first drug on Dec 15th, the company’s share price dropped two days in a row after another negative SA article.
- These critical views focused on the fact that the drug targets a non-life threatening symptom and that there are alternative treatments available.
- Such views, however, represent misunderstandings of the derma med market and disciplinary biases more than anything else.
- The current share price is therefore likely undervalued, and is well-poised for a leapfrogging.
Introduction
The value of a company that is not (yet) generating profit is in the eyes of the beholders. There are often too many variables for anyone to confidently andcredibly say the exact value of a yet-to-be-profitable company.
Nevertheless, it does not prevent some contributors from confidentlyexpressing their black-and-white views on a company’s value, while the ‘credibly‘ part is often lacking.
In a recent article, an SA contributor, Avisol Capital Partners, for example, expressed its strong disapproval to a Pennsylvania-based small cap, Aclaris Theraputics (ACRS) with an unusually harsh tone:
[…] we strongly feel that it has no future, that this whole thing is a gimmick […]
Next day, ACRS share price dropped by 6.76% in intra-day trading, which happened to be the day of the FDA’s approval of its first drug. Reading from the responses to the Avisol’s article, the particular SA contributor appears to be a radiation oncologist in Bengaluru, India (profile). I have no intention to question any SA contributor’s credentials here. The point that I will try to make is that (1) understanding the particularities of a sub medical field is crucial and that (2) disciplinary biases can often intervene proper valuation of a company serving a different field.
With all the respect to their views, the current article intends to cast a different, a more positive view on the company’s potential and on the newly approved drug. In particular, I will try to explain why the potential of ACRS’ newly approved drug may easily be misunderstood by those medical specialists who deal with life-threatening conditions, instead of acne.
