This Latest Target Price On Foamix Looks Positively Frothy (In A Good Way)


Foamix Pharmaceuticals (FOMX) may be the best drug stock opportunity you’ve never heard of — and you should probably prepare yourself to hear a lot more about it.

Over the past 12 months, tiny Foamix has reported a bare $2 million in revenue. So naturally, when British investment bank Barclays revealed two months ago that it thinks Foamix could do $272 million in annual sales by 2025 — and grow its stock price four times over the next year — that caused quite a stir. Last week, Bank of America analyst Jason Gerberry seconded the emotion in a note positing 350% upside in the stock.

Even that prediction pales in comparison to what a third analyst — this time Ken Cacciatore of Cowen & Co. — is now saying. In a bull argument to beat all bull arguments, Cacciatore stated that in his opinion, Foamix could be on track to do as much as $600 million in peak annual sales, and Foamix stock could be worth as much as $30 a year from now –as much as 1,000% more than what it costs today.

This seems like just outlandish enough of a proposal to justify taking a look, even if Foamix is doing essentially no sales whatsoever today. So let’s go ahead and do that.

First, a brief recap of the company and its business. Foamix has two products in development, both targeting the dermatology market. Both products are topical minocycline products, with the main difference being that “FMX101” is a formulation targeting acne, while “FMX103” addresses rosacea.

Both products are wrapping up Phase III clinical trials with the FDA, and both work essentially the same way, even though they treat different conditions. To wit, a liquid medication is salved into the skin, and it acts to lower the melting point of facial “sebum” (an oily substance that can block pores and permit bacteria to grow within the skin, resulting in acne or rosacea), with the result that the oil melts away, allowing the pores (and any bacteria within them) to be exposed to the air, inhibiting microbial growth.

In late 2018 results from the clinical trials, reports Cacciatore, FMX103 was proven to  be “safe and effective” for the treatment of “moderate-to-severe papulopustular rosacea.” More than that, says the analyst: The results of the study were “impressive,” and statistically significant to boot, with “81.6%” of patients in the trial showing improvement in their condition after 52 weeks of treatment.

At this point, Cacciatore says he sees “essentially no clinical development risk” attached to either formulation, meaning that once the FDA approves them for sale, Foamix should see no obstacle to marketing the treatments through its sales force of “50+ sales reps focusing on the 6,000 prescribers that cover roughly 75% of the acne prescription market.” FMX101 could be approved as early as October 20, 2019, and FMX103 could follow in a few months. Its New Drug Application was filed with the FDA just last week.

Nor will financing be an issue once approvals are in hand. “Foamix is well-financed for the initial FMX101 commercialization period,” argues the analyst, “having raised $64MM in July … and ending Q2 with $70MM in cash.” At current cash burn rates, that should be enough to keep Foamix afloat for more than a year as sales ramp up — longer, if the costs of running clinical trials abate, as seems likely.

With financing in hand and a likely receptive market in the form of anxious teens and long-suffering rosacea patients seeking a solution to their little-understood disease, Foamix looks well positioned to prosper once the FDA gives it the green light. Whether the stock will rise 1,000% though, as Cowen promises … well, let’s see how the product sells once it’s on the market before we say any more about that.

All in all, Wall Street’s confidence on the drug maker speaks for itself; FOMX has received a whopping 4 ‘buy’ ratings in the last three months. Meanwhile, the $15.75 consensus price target suggests a potential upside of 488% from the current share price.

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