HOTH Stock: 3 Reasons to Buy Hoth Therapeutics and 2 to Sell
After announcing its mRNA therapy is effective against aggressive cancer cells, HOTH stock surged over 160%. Yet, since the news, Hoth Therapeutics (Nasdaq: HOTH) is again trending in the wrong direction. The biopharmaceutical company is progressing treatments for major diseases through clinical trials. With this in mind, Hoth is focusing on unmet medical needs such as:
- Cancer treatment side effects
- Inflammatory brain disease (Alzheimer’s)
- Skin conditions
- Asthma/ allergies
- Lung disease
- Inflammatory bowel disease
At the same time, the firm is still in its early stages, so it has no profits to show yet. That said, investors are pouring into HOTH stock, expecting big results from the company’s robust product pipeline.
Are you considering buying into HOTH stock? Check out these points below to decide if it’s time to buy at these levels.
The Case for Buying HOTH Stock
The healthcare sector can be challenging to invest in, especially for clinical-stage companies with no sales. But, looking at the HOTH’s pipeline, you can see massive potential.
With HOTH Stock prices bouncing off lows of $0.48 earlier this year, is now the time to buy? Here are a few reasons to believe so.
No. 1 Commercial Launch Soon?
Hoth Therapeutics stock is trending as the firm progresses high-profile drugs through trials. For example, the firm’s cancer therapeutic, HT-KIT, received orphan drug designation earlier this week. With this in mind, the new status provides extra benefits like financial assistance, tax credits and marketing rights.
Here are a few other drugs Hoth stock is progressing through clinical trials.
- HT-001: Potential topical treatment option for skin toxicity associated with EGFR inhibitors.
- HT-ALZ: Uses the active ingredient from HT-001 to potentially treat Alzheimer’s.
- BioLexa: A drug compound platform for the treatment of eczema.
Furthermore, Hoth has several promising drugs in preclinical trials.
- HT-003: A retinoid blocking agent with the potential to treat skin diseases like acne and psoriasis.
- HT-004: A potential disease-modifying agent for asthma or allergies.
- HT-006: A drug with the potential to treat bacterial lung disease.
And lastly, Hoth Therapeutics is developing a device to detect certain viruses.
No. 2 Billion Dollar Markets
If you notice, most of the conditions the firm looks to treat are life-altering. As a result, billions go to new treatments and improvements to existing ones each year.
The market potential is why investors are buying HOTH stock with no commercial drugs. Then again, essentially, all major drug makers started with no product while receiving skepticism over their claims. With this in mind, Hoth is developing unique drugs for several unmet medical conditions.
BioLexa: The Atopic dermatitis (eczema) market is expected to reach $18.3B in 2027, representing growth of 186%. Hoth’s treatment targets the underlying condition and prevents flare-ups.
HT-001: There are currently no approved drugs to treat skin toxicities from EFGR therapy. Nonetheless, the skin toxicity market is expecting to grow 650% to reach $391M by 2030. With this in mind, clinical trials are advancing this year.
Although Hoth’s other drugs are early stage, they look to treat conditions such as acne ($9B market), asthma ($17B market), and pneumonia ($1.7B market).
No. 3 HOTH Stock Breaking Out?
Despite a few attempts to reverse the trend, HOTH stock has been in a downtrend since the initial IPO excitement. But what if this time is different?
Since hitting a low of $0.48 in January, HOTH stock price is up 40%. So far, the reversal is creating a short-term uptrend. Though we will need more confirmation, seeing some momentum regained is promising.
Moreover, with several significant trials advancing this year, will it be enough for a long-term reversal? Compared to last year, Hoth is worth less than half its value. Even though the overall market is down during this time, shares of HOTH are severely underperforming.
For one thing, investors are less willing to buy growth stocks with no profits in this market. Because of the war in Ukraine, rising interest rates and soaring inflation, there is more risk than investors are willing to take on. At the same time, when others are fearful, it may be the best time to buy.
The Case for Selling Hoth Stock
The drugs Hoth is developing no doubt have vast potential. But getting them to the mainstream will be nothing short of a challenge. Before buying HOTH stock, check out a few reasons that may make you think twice.
No. 1 Major Red Flags
Anytime you invest in early-stage drug makers, there comes the risk of losing your investment. In particular, Hoth has red flags to be aware of.
- Funding: Without a commercial drug on the market, will Hoth have the funds to continue operations? Any roadblocks during clinical trials can be detrimental to future progress.
- Competition: Again, without a drug on the market, others can develop a similar treatment. Or a competitor can create a superior drug before the product completes trials.
- Manufacturing: Once the drug is approved, Hoth has no manufacturing ability. In other words, they have no way of mass-producing and getting it into customer hands.
As can be seen, these are real risks to Hoth’s business. If you invest in HOTH stock, keep an eye on these factors as the company progresses.
No. 2 Less Ownership
HOTH stock price is down from its highs earlier this week due to the company selling shares. After announcing the positive news around its cancer treatment, Hoth also announced a public offering of stock.
When companies sell shares, it can reduce individual ownership. Although businesses do so to raise funds, it can lead to significant price drops. Think about it: The more shares of common stock the company sells, the less ownership each investor has.
Hoth Therapeutics announced a public offering of $7M, which roughly translates to 8.2M shares. It makes sense for Hoth as the company needs funds to continue operations. But, for shareholders, the news is not so welcoming.
Without a way to boost earnings right now, HOTH stock will likely remain under pressure until its next catalyst.
HOTH Stock Forecast: Is It Worth the Risk
The big question investors want to know: Is HOTH stock worth the risk? Investing in clinical-stage drug companies presents a huge risk to reward situation.
With several promising drugs going through trials, you can expect more share price runups. But will it be enough to sustain a rally?
For one thing, HOTH stock is already down 95% from its all-time highs. At the same time, penny stocks can be volatile, ramping over 100% only to give it back and more. With this in mind, Hoth’s price targets indicate over 200% upside.
If we see more positive news, HOTH stock has a lot of room to run. On the other hand, if progress slows, be ready for a bumpy ride.
About Pete Johnson
Pete Johnson is an experienced financial writer and content creator who specializes in equity research and derivatives. He has over ten years of personal investing experience. Digging through 10-K forms and finding hidden gems is his favorite pastime. When Pete isn’t researching stocks or writing, you can find him enjoying the outdoors or working up a sweat exercising.