Plethora Solutions is definitely a small cap stock to watch and in an exclusive interview with Sharecast, Daniel Stewart analyst Vadim Alexandre has reiterated the bull case for the biotech tiddler.

Plethora Solutions has a drug, PSD502, aimed at treating premature ejaculation, which has passed two phase III trials and is currently awaiting European approval. This approval is expected late in the third quarter or early fourth quarter of 2013.

Importantly, it announced at its interims on December 28th that talks "had commenced with multiple parties to identify a commercial partner to bring PDS502 product to market.

Alexandre believes the stock is "grossly undervalued" and has placed a price target of 15.7p on it, 214% upside on its current 5p price.

Now, as house broker you might perhaps expect him to be keen on the stock but he's positively enthusiastic, while noting that its closing cash balance at the interims was only £0.2m, which means: "We estimate that the company will need to secure further financing."

He's confident that the next 12 months will see the transformation of the company, with the signing of a deal probably before EU approval, as any partner would have to factor in a ramp-up period prior to the product's launch. With that deal would come some sorely needed funds.

With an estimated 30m European men as potential targets for this treatment it may be a compelling investment case.

Alexandre thinks it is: "We believe that PSD502 has the potential to 'go mass market'. Should this transpire, our estimates of the treatment's market potential would be significantly increased. That said, even if the treatment achieves a fraction of this market penetration, Plethora's business would be substantially transformed."

For those of a cautious disposition, who like to invest in well-funded companies, it might be worth holding off until any deal is announced. Yet, the fact that billionaire Jim Mellon, a non-executive director of the company, has been funding the company in return for shares, ought to offer some reassurance for those prepared to gamble on this biotech play.

CM

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