Evoke Pharma Set to Gain 170%? This 5-Star Analyst Thinks So

Gastrointestinal disease-focused Evoke Pharma (EVOK) kicked off the week in style. Monday, June 22, saw shares go through the roof, and by the end of the trading session, the stock sat on a 62% gain.

The surge came after the the company announced it had received the FDA’s nod of approval for its nasal spray, Gimoti, a treatment for diabetic gastroparesis. The condition disrupts the stomach’s contractions, therefore affecting the digestive process. It can lead to nausea and vomiting among other symptoms.

H.C. Wainwright analyst Ram Selvaraju believes the approval is well deserved. “We note that it has been a long, hard-fought road to U.S. approval for Gimoti and consider Evoke management’s achievement in securing market authorization for the product particularly laudatory given the challenges that needed to be overcome,” said the analyst.

Focus now turns to the commercial opportunity. Evoke has a partnership with EVERSANA Life Sciences, which will oversee the product’s entry to market. The deal dictates Evoke will retain 80% of the profits generated.

Selvaraju estimates the company currently has $8 million in cash which should be enough to make it into 2021, regardless of Gimoti sales. The approval also enables the company to access $5 million in funds from EVERSANA under a revolving credit facility. According to Selvaraju, Gimoti’s impact on the balance sheet will come into effect next year.

“We are currently projecting only negligible (~$1 million) in Gimoti sales for 2020, which we consider a conservative goal. For 2021, we project $14 million in total sales and roughly $13 million in revenue to Evoke. Assuming this modestly-paced trajectory for Gimoti, we anticipate that Evoke could achieve cash flow breakeven in 1H22,” Selvaraju said.

Looking ahead, the analyst expects peak US annual sales to exceed $300 million by 2027. Evoke’s patent for Gimoti is set to expire in 2030.

The approval results in a reevaluation from Selvaraju. The 5-star analyst upgraded his rating on the stock from Neutral to Buy. Additionally, Selvaraju set a $10 price target, implying upside potential of approx. 170%. (To watch Selvaraju’s track record, click here)

Turning now to the rest of the Street, it has been quiet when it comes to other analyst activity. Selvaraju’s rating is the only recent review of the stock.

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