Finch Therapeutics Group: Pipeline to Profit?

Although still at a clinical stage, this U.S. biotech stock holds the potential to turn into a profitable investment.

Based in Somerville, Massachusetts, Finch Therapeutics Group (FNCH) is a developer of innovative biological treatments for patients in the United States.

The company’s main candidate is a microbiome oral capsule to treat recurrent Clostridioides difficile infection, which is an inflammatory condition of the colon. The illness shows itself with abdominal pain, diarrhea, and fever. Often, people with this illness have too many white cells in their blood. (See FNCH stock charts on TipRanks)

From the Most Recent Quarter

The company is not producing an income yet.

From the collaboration with other pharmaceutical companies, Finch made small revenues of $2.8 million in the second quarter of 2021 which, coupled with a lot of spending for research and development and for general and administrative expenses, triggered a net loss of $15.2 million.

Future Demand, Clinical Trials, and Upcoming Events

It is commom to see patients on broad-spectrum antibiotic therapy suffering from recurrent Clostridioides difficile infection, as antibiotics promote some resistant strains to generate an inflammatory process.

Every year, too many people in the U.S. take antibiotics to fight various bacterial infections. Their incorrect use can also lead to an inflammatory bowel disease, as it accelerates the appearance and spread of resistant bacteria.

Problems related to modern society, such as an unhealthy lifestyle, obesity, stress, and depression are also excellent factors for predisposing people to the medical condition.

Once approved, Finch’s product will encounter a robust demand. There are still some trials to go before the product can access the profitable market of irritable bowel disease (IBD) treatments. Zero debt and total $170 million in cash on hand should provide the strength to fund clinical investigations for the next couple of years. Topline data from a trial assessing the product on 130 patients should be available within 18 months. In the meantime, this stock could attract more and more attention on the market.

The company also develops minor treatments for children with autism and for hepatitis-B virus chronically infected patients.

FNCH Valuation

Year-to-date, the share price dropped by more than 40% and now seems inexpensive.

Shares were changing hands for $12.20 apiece at closing on Wednesday, not so far from the lower limit of the 52-week range of $11.56 to $22.50. This price level is lower than the 200-day simple moving average line and lower than the 50-day simple moving average line. The market capitalization hovers at $578.88 million.

Wall Street’s Take

In the last three months, one analyst on Wall Street assigned a Buy rating. So, Finch Therapeutics Group is a Moderate Buy. The average FNCH price target of $34 implies approximately 178.69% upside potential.

Summary

Finch Therapeutics Group is a clinical-stage biotech developer of biologic treatments. The company is not yet producing an income, as the main product has not been approved for sale yet.

In consideration of future perspectives for the treatment, the stock holds a growth potential at an accessible price, following a more than 40% drop in the share price.

Disclosure: On the date of publication, Alberto Abaterusso did not have any positions in the securities mentioned in this article.