Cathie’s career has been founded on holding contrarian views, and her Ark Invest firm has a reputation for going against the mainstream. As a result, the bear market of 2022 has done little to modify her mind. In fact, Wood has recently argued that the Fed’s strong monetary policy in its continued efforts to rein in skyrocketing inflation is incorrect. Highlighting deflationary signals, Wood claims that the Fed’s activities could lead to a repetition of the Great Depression.
“If the Fed does not pivot, the situation will resemble 1929,” Wood predicted. “The Fed hiked interest rates in 1929 to stifle financial speculation, and then, in 1930, Congress approved Smoot-Hawley, imposing 50%+ tariffs on over 20,000 items and plunging the global economy into the Great Depression.”
Meanwhile, the Fed’s policies and interest rate hikes have wreaked havoc on the markets, sending shares plummeting across the board and leaving many firms appearing rather cheap.
So Wood went shopping, and we used TipRanks’ database to see what the analyst community thought about two minor companies under $5 that her firm recently purchased. Each ticker, it turns out, has only gotten Buy ratings. Not to mention the fact that there is significant upward potential.
Life Sciences ATAI (ATAI)
Wood has a reputation for favoring cutting-edge enterprises, and the first pick reflects that. ATAI is testing the use of psychedelics for therapeutic purposes, which could usher in a new paradigm in the treatment of mental health diseases.
The business concept of the company is unique; it operates through a decentralized platform that purchases and manages clinical studies with small affiliate companies created around pipeline candidates. Everyone has access to shared money, with capital provided based on need.
Following the elimination of some of its early studies that were judged unnecessary, the company’s pipeline has been pared down to eight prospects aimed at treating depression, anxiety, schizophrenia, and substance misuse.
PCN-101/R-ketamine is leading the way as a treatment for treatment-resistant depression (TRD). Then there’s RL-007, which addresses cognitive impairment in schizophrenia patients. Both of these medications are currently in phase 2 trials.
GRX-917 (deuterated etifoxine), which is being investigated for generalized anxiety disorder (GAD) and for which the company recently disclosed positive preliminary pharmacokinetics and pharmacodynamics results from a Phase 1 study, is also in development. Positive preliminary results from the single ascending dose (SAD) phase of the KUR-101 (deuterated mitragynine) Phase 1 trial to treat opioid use disorder (OUD) were also recently announced.
With the stock down 64% year to date, Wood has been on the lookout for bargains. In the third quarter, Ark Invest increased its holdings in ATAI by 280% by purchasing 6,133,914 shares. These are now worth $17.61 million at the current share price.
With top-line data for PCN-101’s Phase 2a proof-of-concept study expected before the end of the year, Canaccord analyst Sumant Kulkarni believes the approaching readout could influence near-term sentiment, while the analyst also believes those who take the long view will be rewarded in the end.
“We feel it is critical for the stock if PCN-101 meets the objectives,” says Kulkarni. “We are aware of the risks, as with any neuropsychiatry trial, but at this time, we believe the absolute dollar downside is less than the possible upside.”
“Our wider picture thesis on the company remains the same,” the analyst continued, “namely, we continue to believe ATAI represents a potentially strong opportunity for investors (particularly those with patience and/or a longer-term focus) to participate in the underserved mental health market.” Along these lines, we highlight ATAI’s very broad mental health-focused pipeline (with a fair balance of non-psychedelic and psychedelic chemicals), as well as its cash runway into 2025E, which covers some potentially significant catalysts.”
Kulkarni is clearly enthusiastic; in addition to a Buy rating, the analyst’s $27 price objective allows for an incredible 868% one-year gain.
Kulkarni’s viewpoint is not an outlier; all existing evaluations – a total of five – are positive, giving the stock a Strong Buy consensus rating. Furthermore, the average objective is $25.60, implying that they will rise 818% in the next 12 months.
SomaLogic (SLGC) (SLGC)
The following Wood choice will be a protein biomarker development and clinical diagnostics firm. SomaLogic is a company that works in the field of proteomics. This is a growing market, with the global proteomics market expected to grow by 15% per year and reach $64 billion by 2024.
SomaLogic is targeting a large portion of this market and may have the tools to do it. Its SomaScan Discovery Platform can investigate 7000 proteins in just 55 microL of a blood sample, much beyond competitors’ capabilities. It has also amassed a significant clientele that includes, among others, Bristol-Myers Squibb, Novartis, Amgen, the University of Cambridge, and Stanford. Furthermore, its proteomics platform is used by both FDA and NIH labs.
The company is fresh to the public markets, having gone public in September 2021 through a SPAC merger. The timing is terrible, as SPACS have fallen out of favor during the bear market of 2022. To wit, the stock has fallen 77% since the beginning of the year.
With the stock on the back foot, Wood clearly believes it represents decent value. In the third quarter, Ark Invest purchased 11,017,672 shares of SomaLogic. These are now worth more than $29.6 million.
Stifel analyst Daniel Arias, who sees SomaLogic as “best-in-class in multiple areas” in the growing proteomics space, is also enthusiastic.
“The company has a first-mover advantage in the industry because of an established portfolio that has been in the market for some years and has set the foundation for good connections with significant commercial (i.e. Novartis and Amgen) and academic research organizations,” Arias added.
“SLGC’s quarterly ups and downs have made forecasting difficult this year, but 4Q could have some upside potential, ’23 should still be a healthy growth year for the company – and we continue to consider SLGC as one of the companies well-positioned to profit on a rising proteomics industry.” With shares trading around cash, we believe they screen as appealing in the smid cap market,” the analyst noted.
To that end, Arias recommends SLGC shares as a Buy, with an $8 price objective implying that the stock’s value might rise 189% in the coming year.
Are other analysts in agreement with Arias? They certainly do. Only three Buy ratings have been granted in the last three months, thus the consensus is a Strong Buy. The average price target is $8, which is the same as Arias’.
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