Atossa Genetics Inc. (ATOS) is a clinical-stage biopharmaceutical company that discovers and develops innovative medicines in the areas of oncology and infectious diseases. The company is currently trying to expand its pipeline with the development of AT-301, a proprietary drug candidate administered by nasal spray for patients diagnosed with COVID-19, and AT-H201, a therapy to  improve lung function in COVID-19 patients. ATOS’ shares have surged 28% over the past year due to its continued progress in key drug development programs.

However, the stock is currently trading 40.3% below its all-time high of $6.82. And although the company has released final data from its Phase 2 clinical study of breast cancer oral drug candidate Endoxifen, there is little clarity about when the company will apply for FDA  approval to commence clinical testing in the United States.

And while its drug candidates look promising, increased competition in the COVID-19 drug development field could make it difficult for the company to gain significantly from the commercialization of its drugs.

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So. here is what we think could influence ATOS’ performance in the near term:

Uncertain Growth Prospects

ATOS recently delivered the final data from its Phase 2 clinical study of oral Endoxifen for breast cancer. The company has initiated the formal non-clinical toxicology program needed to market the therapy, and it plans to seek  FDA approval to  conduct a clinical study. However, currently, there are several FDA-approved drugs for treating breast cancer. Since the market is already crowded with competitors, ATOS, as a  clinical-stage company could face a wave of competition  even after it receives FDA approval.

Also, the company’s COVID-19 drug candidates—AT-H201 and AT-301—are still in their Phase 1 studies. This suggests  that it will be some time before the candidates receive FDA approval and generate revenues for ATOS.

Lackluster Financials

In the first quarter, ended March 31, 2021, ATOS’ total operating expenses increased 20.2% year-over-year to $3.53 million. Its net loss came in at $3.54 million for the  quarter, compared to a $2.95 million net loss in the first quarter of 2020. Also, it reported a $0.04 loss per share. ATOS does not have any products that have been approved for commercial sale, and hence it does not generate any revenues.

The company’s trailing-12-month ROE, ROTC and ROA came in at a negative 30.7%, 12.6% and 13.1%, respectively. Moreover, its trailing-12-month cash from operations came in at negative $12.75 million.

Mixed Analyst Estimates

The consensus EPS estimate for the current quarter, ending June 2021, indicates a 93% rise year-over-year. However, the company’s EPS is expected to decline 7.1% from its year-ago value in 2022. In this regard, ATOS does not have an impressive earnings surprise history. The stock failed to beat  consensus EPS estimates three of the trailing four quarters.

Consensus Price Target Indicates Potential Upside

Two Wall Street analysts have provided ratings for the stock, and both have rated it Buy. Currently trading at $4.07, analysts expect the stock to hit $6.5 in the near term, indicating a 59.7% potential upside.

POWR Ratings Indicate Uncertain Prospects

ATOS has an overall C rating, which translates to Neutral in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree. 

Our proprietary rating system also evaluates each stock based on eight different categories. ATOS has a C grade for Quality. This justifies the stock’s mixed profitability. It also has a C grade for Sentiment.

The company has a D Stability grade, indicating that it is more volatile than its peers.

Beyond the grades that we’ve highlighted, one can check out additional ATOS ratings for Momentum, Growth and Value here. ATOS is ranked #204 of 487 stocks in the F-rated Biotech industry.

Click here to view the top-rated stocks in the Biotech industry.

Bottom Line

ATOS has gained 28% over the past year. While the company’s innovative drug development programs have driven its  stock price so far this year, given that the global pharmaceutical market is highly competitive, ATOS could face uncertainties  in its growth path. Furthermore, it could be quite some time before its COVID-19 and breast cancer drug candidates prove sufficiently safe and effective to secure FDA approval, which it will need before it can commercialize the drugs  and generate revenues. So, we think investors should wait for better entry points before investing in the stock.

Click here to checkout our Healthcare Sector Report for 2021

ATOS shares rose $0.08 (+1.97%) in premarket trading Friday. Year-to-date, ATOS has gained 333.68%, versus a 13.80% rise in the benchmark S&P 500 index during the same period.

About the Author: Imon Ghosh

Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...

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