Shares of clinical-stage oncology company Oncternal Therapeutics (ONCT -5.10%) are soaring through the roof on Wednesday thanks to bullish commentary from a Wall Street analyst. The biotech stock was up by 10.5% as of 3:41 p.m. EDT after climbing by as much as 21.8% earlier in the day.
Oppenheimer analyst Hartaj Singh initiated coverage of Oncternal Therapeutics with an outperform (buy) rating and a price target of $14. Oncternal Therapeutics closed yesterday's trading session worth $8.66 per share, and even after today's rally, its shares are changing hands for just $9.55 apiece. In other words, Singh sees significant upside potential for Oncternal Therapeutics. What's the reason behind the analyst's confidence? Singh believes that Oncternal Therapeutics' leading pipeline candidate, ROR1 inhibitor cirmtuzumab, is a promising product.
ROR1 is a protein that is highly expressed in several forms of cancer. Cirmtuzumab is a potential treatment for mantle cell lymphoma, breast cancer, and chronic lymphocytic leukemia. The profile of ROR1 inhibitors rose thanks to some big-name drugmakers throwing their hats in this ring. Most notably, pharma giant Merck recently acquired clinical-stage biopharmaceutical company VelosBio in a cash transaction valued at $2.75 billion. VelosBio's lead pipeline candidate is a ROR1 targeting cancer treatment called VLS-101. Thanks to these developments, Singh is bullish on Oncternal Therapeutics' prospects.
Analyst recommendations are always worth considering, but should investors follow Singh's advice? In my view, it depends on each individual investor's goal. As a small-cap biotech company -- and one with a few promising programs under its belt -- Oncternal Therapeutics could benefit from short-term catalysts pushing its stock price higher. But for long-term investors, there is still far too much risk and uncertainty surrounding Oncternal Therapeutics to justify purchasing its shares.
The company, which has no products on the market at the moment, could run into regulatory roadblocks or negative results from clinical trials, both of which would send its shares falling off a cliff. With that in mind, investors focused on the long game would do well to stay on the sidelines for now.