EyePoint Pharmaceuticals (NASDAQ: EYPT) stock is up 251% on the month and 60% just at the end of last week. Clearly the stock is on a tear but the difficult question is how long is this going to last? Are we seeing some mere change in sentiment which could - will perhaps - reverse? Or is this a fundamental revaluation of the EYPT prospects? Our difficulty here is that there is no specific - at least official - information to tell us one way or the other. There is nothing on Edgar (the SEC document database) from the company that explains this. There is not been a sudden FDA approval, a big contract, a bid for the company, not that we know of at least.
So this must be a change in sentiment about the EyePoint prospects then. But the thing about changes in sentiment is that they can, well, change. Something has made people much more interest in the story this past month, in a way that they were not, or were not so much, for the previous year. EYPT stock did wandered around in the $2.50 to $4 range for months, it is this recent surge to $9 that requires the explanation. One possibility is clearly that it is just a momentum trade, Some get persuaded by the story, buy and the price rises. Others see the rise and chase it, diving the price up again. Another is the possibility of a short squeeze - 18% of the stock and more is out on loan and that might be enough for people to be able to squeeze such positions.
EyePoint Pharmaceuticals stock price from NASDAQ
It is also possible that there is real movement in the development of the EyePoint products: The surge in the stock price is likely due to positive momentum building around the company's lead pipeline candidate EYP-1901 which is being evaluated for multiple retinal indications, including wet-age-related macular degeneration (wet AMD), non-proliferative diabetic retinopathy (NPDR) and diabetic macular edema (DME). Recently, EyePoint Pharmaceuticals completed patient enrollment in a phase II clinical study evaluating EYP-1901 for treating wet AMD.” All of which is very nice but it is still, really, a change in sentiment. Having recruited patients for a Phase II study is a necessary step, sure it is, but it is not a hundreds of percent driver of a stock price - not without investors out here radically changing their views it's not.
It is entirely true that a new and decent treatment for wet macular degeneration would be very valuable but it's pretty early days to be assuming that this is what EyePoint has. We would recommend great care in trading EYPT currently as such changes based upon sentiment can rapidly reverse.
