With Acusphere, Inc.'s (ACUS) stock trading below $1 now for over 30 days, the company received a NASDAQ non-compliance letter in early January 2008. Acusphere has only 38+ million shares outstanding, so a reverse split seems highly unlikely. However, there are several near-term catalysts that could get the stock back over $1 before an official delisting.

Our $5 price target is based on our belief that Imagify is real, and that Acusphere will eventually secure a partnership for the drug in the U.S. Although we don't expect to see this level anytime soon, even $5 would be significantly undervalued if Imagify, a potential billion-dollar product, does get approved in early 2009.

Our model below explains quite simply our stance on Acusphere. We see $2.45 in EPS in 2011 based on $321.5 million in Imagify sales. At the current market capitalization of $30 million, the name represents the most undervalued story in our entire biotech coverage universe. At this point we are surprised the company has remained independent. Our only concern is that someone could takeout Acusphere at $50-100 million ($1.50 -- $ 2.50 / share), and that would be unfair to long-time shareholders that believe in the story and have been waiting around through difficult times for that day when it all comes together.

Our thesis is that, assuming all four of the above events take place by April / May 2008, Acusphere should be able to secure enough financing to continue with Imagify until the FDA rules in early 2009. Obviously a positive ruling will send the shares soaring. However, the goal right now is to get the stock back above $1, and meeting the near-term goals outlined above should get the job done.