Why VistaGen (VTGN) Stock Skyrocketed 60% Today

Shares of drug maker Vistagen (NASDAQ:VTGN) skyrocketed nearly 60% on Friday after the stock received a positive mention in an Oppenheimer analyst report, describing uplifting investment opportunity in depressed market.

This morning, Oppenheimer analyst Jay Olson initiated coverage on VTGN with Outperform rating and price target of $6.00, which implies an upside of 291% from current levels. (To watch Olson’s track record, click here)

Olson’s bullish rating reflects the view that the company’s is underappreciated and undervalued, with a novel, potentially best-in-class, rapid acting antidepressant.

Olson wrote, “We expect AV-101 to enter the US treatment-inadequate MDD market in 2023 initially capturing a minimal (0.3%) market share of MDD patients with inadequate response to current treatment and a $7,000 annual net price (based on the average of existing adjunctive treatments), which we expect to increase by 1% annually. At peak, we project AV-101 to achieve a 5% share of the US treatment-inadequate MDD market based on the competitive landscape, which will include branded and generic competitors. Our peak sales forecast is $1.5B in 2030. We assume a 25% probability of success based on published rates for psychiatric drugs in Phase 2, which leads to a risk-adjusted peak sales forecast of $373M in 2030. We are currently not modeling any sales for AV-101 outside the US, which we view as conservative considering the large market for anti-depressants outside the US and AV-101’s intellectual property, which includes Europe and Japan.”

Another reason for the massive increase today is a the short interest that reached record highs of nearly 2 million shares as of the middle of May. When a stock with a lot of short interest catches fire to the upside, the move tends to be exacerbated by short-sellers being squeezed out of their positions and “buying to cover” in order to exit. That said, Olson’s report likely pushed short-sellers out the door.

VTGN has only received one other analyst rating in the last 12 months. Five-star Chardan analyst Gbola Amusa has a Buy rating on the stock with a $22 price target- suggesting that the stock is ridiculously undervalued. Amusa models a 40% probability of success for AV-101 in major depressive disorder, and $2.0 billion in 2030E sales.

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