Zacks sees over 600% upside in AI-powered biotech micro cap Evaxion

In a recent report, Zacks Small-Cap Research (Zacks SCR) makes the case for its $19.75 per share valuation of the micro-cap company Evaxion, which aims to “harness the power of the human immune system” to create novel immunotherapies for cancer and infectious diseases with its AI platform. The Zacks SCR target price is 7.5 times the current market price. Evaxion’s technology can speed up drug development and lower the risk of failure, but Zacks SCR further argues this is just “the tip of the iceberg,” and that the name warrants investors’ attention..

Zacks SCR values Denmark-based Evaxion Biotech, whose American depositary receipts (ADRs) trade on the Nasdaq, at $19.75 apiece, almost 654% above the current market price: Yesterday, Monday, February 10, the stock closed at $2.62 per ADR.

Evaxion claims its AI models can identify novel targets within days versus the years it usually takes with standard drug discovery methods, as noted by Zacks SCR. Moreover, the use of AI helps to mitigate the risk of failure by immediately filtering out results that may result in low efficacy or toxicity. Recall that drug safety is assessed in phase I clinical trials, and efficacy in phase II.

Recently, the company reported positive preclinical data for its cytomegalovirus vaccine (none currently exists for this type of herpesvirus). It also reminded investors that in phase II clinical trials (there are three), its cancer vaccine triggered a tumor-specific response in 79% of cases — up from 58% in phase I. Zacks SCR attributes the improved results to the ability of Evaxion's AI platform to learn from previous trials and refine treatments.

“We continue to be excited about the investment opportunities offered by EVAX. In our view, these announcements are the tip of the iceberg of what the AI platforms developed by Evaxion can achieve,” Zacks SCR says. It believes the company is at a turning point that could mark «the start of sustained uptrend» in the stock.

According to MarketWatch, two analysts cover Evaxion. Their average target price is $9.75 per ADR, implying 272% upside, according to Benzinga. In early February, HC Wainwright & Co reiterated its “buy” call on Evaxion with a target price of $14.00 per ADR. Lake Street has also reaffirmed its “buy” rating but slashed its target price by 83% to $6.00 per ADR. That came after Evaxion closed a deal to sell 4 million ADRs at $2.71 apiece and 2 million five-year warrants at the same price, as reported by TipRanks. Participating in the offering was the corporate venture capital arm of pharmaceutical giant Merck & Co (MSD), which became an Evaxion shareholder in 2023, as well as investment funds and insiders, according to the press release.

MSD partners with Evaxion to develop vaccines for two infectious diseases, according to the official website. Given Merck’s participation in the offering, “it stands to reason investors should feel more confident about the possibility of Merck pulling the trigger on either or both EVX-B2 and EVX-B3,” as TipRanks quotes Lake Street.