Aclaris Therapeutics Stock Forecast: There is a strong case for investing in biotech stock, beginning with changing demographics.
As a whole, the global population is aging, and the number of US residents age 65 and over will double between 2014 and 2060. According to the United Nations, that trend holds true around the world. Globally, the number of people over the age of 60 will double by 2050.
People are living longer, thanks to advancements in healthcare. These include better preventative measures for formerly deadly diseases, as well as more effective therapies when illness and disease do strike. As people transition into old age, their need for prescription medications grows, and they are more likely to require care for a range of health-related conditions.
Companies involved in all types of medical and geriatric care will benefit from these trends, but biotechs have several advantages. Biologic drugs enjoy greater legal protections and longer periods of exclusivity than non-biological peers. In addition, it is more difficult for competitors to create bio-similar products that match biologic drugs than it is to duplicate non-biologic formulas.
The market is there, and the regulatory environment works in favor of biotech companies. That means adding these stocks to a balanced portfolio can lead to healthy returns. The issue investors face is choosing which companies are most likely to generate value for shareholders in the short-term and long-term. One option is Aclaris Therapeutics.
The Downside of Biotech Investing
Biotechs, as well as other companies developing disease therapies, must make massive investments of time and money to bring a drug to market. It can be years before these businesses see a profit, and in many cases, the profit never comes.
The truth is that only 10 percent of drugs that make it to the clinical trial stage ever get approved for market.
In many cases, biotechs need infusions of cash along the way to fund critical research and development activities like clinical trials. The impact to investors is that shares don’t tend to deliver value for long periods after they are purchased. Those with short-term financial goals can easily realize a loss if they have to sell within the research and development phase.
Shareholders who can afford to buy and hold must have the stamina to weather frequent changes in share value. Stock prices tend to yo-yo as the company announces its progress along the path to FDA approval.
With all of that said, the biotech industry as a whole has been remarkably successful. This segment has achieved ten year annual returns of approximately 15 percent, which is more than double the S&P 500. The tricky thing for investors is determining which companies have the greatest chance of success. Is Aclaris Therapeutics a smart choice? What is the ACRS share price forecast?
What Does Aclaris Therapeutics Do?
Aclaris Therapeutics [NASDAQ: ACRS] was founded in 2012 with a goal of designing new solutions for underserved conditions. Over the past eight years, it has focused on identifying, developing, and marketing drugs for certain dermatological and immunological diseases.
Aclaris was successful in bringing its ESKATA (hydrogen peroxide topical solution) to market for the treatment of seborrheic keratoses.
While some patients were thrilled with the drug’s effectiveness, it ultimately did not catch on. In August 2019, Aclaris discontinued the product.
That decision came in conjunction with bad news about one of the company’s most promising drug candidates, a topical treatment for male and female pattern baldness. Between the two events, share prices plunged dramatically, losing most of their value in a matter of weeks.
Is Aclaris Therapeutics a Buy?
The primary question investors have is whether ACRS stock is a buy. In short, the answer is most likely not right now.
In 2019, Aclaris Therapeutics [NASDAQ: ACRS] reported quarterly losses of $23 million, totaling $92 million for the year.
Considering the net book value of the company’s equity is just $85 million, the entire operation could go under in a matter of months.
In its most recent financial reports, Aclaris stated it has $91 million in cash on hand, and business leaders indicated they expect this amount to carry the company through third quarter 2021. Most analysts don’t consider this projection realistic, as Aclaris has liabilities topping $75 million.
Experts generally agree that Aclaris needs a substantial cash infusion from a partner company to continue its work, but there are no signs that such a partner is going to appear.
The pipeline simply doesn’t appear to warrant a lot of interest from larger biotech and pharmaceutical organizations, and there isn’t anything in the works that is attractive enough to inspire an acquisition.
Certainly, there is always a chance that unexpected events will turn Aclaris Therapeutics around, but is that possibility worth the current level of risk?
What are the Risks of Buying Aclaris Therapeutics?
Any purchase of biotech stock comes with the risk of total loss, and that risk is particularly acute for companies with limited pipelines.
Aclaris Therapeutics [NASDAQ: ACRS] has been unsuccessful in marketing the few products that have survived the difficult FDA approval process, and drugs in its pipeline now are at the very earliest stages.
Investors who bought into Aclaris early based on the promise of Aclaris’ initial research have seen the value of shares drop nearly 95 percent in recent years. While it is possible that some of the newer projects will be successful, the company’s track record doesn’t inspire much confidence.
For these reasons, Aclaris stock carries higher risk than that of its already-risky biotech peers, so most investors would be smart to stay away for the time being.
Aclaris Therapeutics Stock Forecast Summary
The bottom line is that Aclaris is a particularly high-risk addition to any portfolio, so it’s not a smart choice for most investors.
At best, those with a bit of extra cash to gamble might buy shares at the current low price on the off-chance that an unexpected breakthrough causes stock prices to jump.
Everyone else should choose more established companies that have a greater likelihood of generating future returns. If Aclaris does turn things around and stock values begin to rise, that decision can be re-evaluated.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.