MTP Stock Price Moves 44% – Time to Buy Midatech Stock?
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Midatech Pharma stock rose over 44% yesterday but was trading lower in US premarket price action today. Why’s the stock so volatile and should you buy it now?
Midatech Pharma (MTP) is a drug delivery technology company that is working on improving the bio-delivery and bio-distribution of medicines. The stock is listed on the UK and the US market.
The company has three in‐house technology platforms which are Q-Sphera, MidaSolve, and MidaCore. All these having their own unique mechanism that can help improve the delivery of medications to sites of disease. All these technologies have successfully entered human use in the clinic.
Why Midatech Pharma stock soared yesterday
While Midatech Pharma stock is up over 57% so far in 2021, it trades at a fraction of its 2016 highs. The stock rose sharply yesterday after announcing a “breakthrough” in its technology where the results showed a potential to form proteins into long-acting injectable therapies.
Expressing optimism over the findings, Midatech Pharma said that “the Company believes these results could potentially open up very significant opportunities for its Q-Sphera technology.” It added, “A significant number of latest generation medicines are protein based and reformulation as long-acting injectables could provide significant benefits to patients, physicians and payors.”
Commenting on the market potential, Midatech Pharma said that last year, the top 10 monoclonal antibodies recorded sales of $74.9 billion while the total sales were around $54 billion.
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Product pipeline
Midatech Pharma has several products in the pipeline. One of these is MTD211 which is a long-acting formulation of brexpiprazole. According to the company, the product “is expected to deliver therapeutic blood levels of brexpiprazole over a period of three months.” The company said that it is in talks with third parties to license the product but did not commit to a timeline. The management estimated the market size for long-acting antipsychotic products at $5.7 billion.
Midatech Pharma has lowered the cash burn
The company has been working to address its high cash burn rate which it has managed to halve since it shut down its Bilbao operations. At the end of 2020, the company had £7.5 million as cash and cash equivalents as compared to £10.9 million at the end of 2019. Clinical stage companies spend a lot of cash towards research and development, and clinical trials. Usually, companies announce a stock sale after the positive trial result to capitalize on the spike in their stock prices.
Midatech Pharma technical analysis
After the spike yesterday, Midatech Pharma stock is trading above the 50-day SMA (simple moving average) and 200-day SMA. However, its 14-day RSI (relative strength index) is 79 now which is a sign of overbought positions. Usually, clinical-stage companies see a price correction after the initial surge following the trial results. MTP stock was trading over 5% lower in US premarket price action today after the surge yesterday.
MTP stock forecast
Midatech Pharma is a penny stock as its stock price is below $5 which is the threshold set by the US SEC. None of the analysts cover Midatech stock as Wall Street generally shies away from penny names which are much more volatile than larger companies. Also, despite the spike, Midatech Pharma has a market capitalization of less than $40 million. Most brokerages don’t cover stocks with a market capitalization below $100 million.
Meanwhile, the market potential for Midatech Pharma is quite immense. Looking at its tiny market capitalization, the stock could be a multi-bagger if it can execute well on the product development. However, like all clinical-stage companies, it is a risky bet. The stock’s tiny market capitalization makes it even riskier as it’s easier to manipulate the prices for small companies.
Looking at the valuations, Midatech Pharma trades at an NTM (next-12 month) enterprise value to sales multiple of 15.9x. Since the company is posting losses, we cannot value it based on profitability-based metrics. That said, the stock could see a major rerating if the company can commercialize the products.
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