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All Contents © 2019The Kiplinger Washington Editors
By Harriet Lefton, Contributing Writer
| August 8, 2018
Are you ready? Biotech stocks provide a compelling opportunity for risk-tolerant investors looking for rich rewards. Regardless of market sentiment, economic data or trade wars, a key regulatory approval or trial data can send prices rocketing.
Consider Madrigal Pharma (MDGL), which exploded by nearly 150% back in May following positive Phase 2 results for a liver-disease treatment.
Of course, the opposite can also be true – prices can fall just as quickly if data or approvals fail to impress. That’s why it’s so crucial to conduct thorough research before investing in this high-potential (but high-risk) area of the market. For instance, using TipRanks, we can assess both the analyst consensus rating (all the stocks covered below are a “Moderate Buy” or “Strong Buy”) and the expected upside potential based on recent ratings.
Here are seven biotech stocks that could be catapulted higher by near-term catalysts. We’ll also explore the pros’ analysis and price targets for each company.
Data is as of Aug. 7, 2018.
Market value: $9.5 billion
TipRanks consensus price target: $163.00 (74% upside potential)
TipRanks consensus rating: Strong Buy (See Details)
Biotech Alnylam Pharmaceuticals (ALNY, $93.88) is developing novel RNAi-based therapies to treat serious diseases with high unmet medical need. This includes a rare, and potentially fatal, protein disease called TTR amyloidosis.
Top B. Riley FBR analyst Madhu Kumar (view Kumar’s profile & recommendations) recently reiterated his take on ALNY as an “Out-the-Gate 2018 pick.” He also ramped up his price target from $200 to $210 (129% upside potential).
Kumar spies two potential catalysts on the horizon for ALNY. Most notably, the PDUFA date for lead asset Onpattro is fast-approaching on Aug. 11. He writes: “We continue to have conviction that ALNY’s TTR RNAi franchise should dominate the landscape of hereditary TTR amyloidosis (hATTR), with the Aug. 11, 2018, PDUFA date for lead asset Onpattro potentially serving as a positive catalyst for ALNY shares.”
Investors also are keeping a close eye on Pfizer (PFE), which has received Breakthrough Therapy status for its own TTR stabilizer drug. Pfizer is due to present full results from the Phase III TTR trials at an Aug. 27 cardiology conference in Munich.
Interestingly, this could also benefit ALNY. Kumar explains: “We remind investors of our conviction that ALNY’s TTR RNAi franchise could prove the best-in-class treatment option in TTR disease, and thus view any weakness in the ATTR-ACT data presentation at ESC as a potential positive catalyst for ALNY shares.”
Market value: $1.2 billion
TipRanks consensus price target: $30.50 (39% upside potential)
TipRanks consensus rating: Strong Buy (See Details)
Intra-Cellular Therapies (ICTI, $22.00) is developing innovative treatments to improve the lives of individuals with mental health disorders. The company is now entering a “catalyst-rich” period.
Most importantly, “ITCI remains on track to complete of its New Drug Application (NDA) submission for lumateperone in schizophrenia … any day now.”
“We eagerly await the FDA’s potential acceptance of this NDA” commented Canaccord Genuity’s Sumant Kulkarni (view Kulkarni’s profile & recommendations) on Aug. 2. “Lumateperone, if approved, could become a meaningful competitor in the schizophrenia space given its benign safety/tolerability profile vs. the current standard of care.”
“ITCI presents scarcity value in that it is one of the few companies with promising late-stage assets in the neuropsychiatry space, where pipeline success remains somewhat elusive,” Kulkarni writes. Currently available medications are limited in use because of serious potential side effects like movement disorders, cardiovascular disorders and weight gain.
Other second-half catalysts include top-line data for a Phase III trial for lumateperone in bipolar depression. ITCI also plans to initiate clinical program of lumateperone in depressive disorders before year’s end.
Market value: $10.9 billion
TipRanks consensus price target: $200.91 (12% upside potential)
Irish drug company Jazz Pharmaceuticals (JAZZ, $179.90) boasts a diverse portfolio of drugs – realized and in development. This includes advanced drug candidates for narcolepsy and acute myeloid leukemia.
Cantor Fitzgerald’s William Tanner believes the company is now entering a critical period.
According to Tanner: “The next 6-12 months will be an important period for the company (and stock) with likely approval of a new product, solriamfetol (PDUFA date December 20), and release of Phase 3 trial data in early 2019 for JZP-258, an asset we believe will be critical for extending the oxybate franchise.” He sees “meaningful upside from here” despite fears that the stock is “priced for perfection.”
Tanner isn’t alone in this upbeat analysis of Jazz’s prospects. Top B. Riley FBR analyst David Buck (view Buck’s profile & recommendations) has also just published a "Buy" rating on the stock. “Expect December PDUFA date for Solri (solriamfetol) for excess daytime sleepiness to be a catalyst as we expect approval,” Buck writes.
Jazz remains B. Riley FBR’s “Alpha Generator” top pick, with a $219 price target that implies 22% upside from current levels.
Market value: $237.5 million
TipRanks consensus price target: $16.75 (186% upside potential)
Marinus Pharmaceuticals (MRNS, $5.86) is an intriguing biotechnology company that develops antidepressants. The company is currently gearing up to report top-line data from part one of the Phase II Magnolia study of ganaxolone IV in women with postpartum depression (PPD). “We anticipate this will be an important catalyst for the shares” cheers top Mizuho Securities analyst Difei Yang (view Yang’s profile & recommendations).
“We see upside potential of 100%+ assuming convincing data including a clear dose response” Yang writes. Indeed, her $13 price target on MRNS indicates 122% upside potential. Plus, “the downside is limited given the history of the compound and potential in other indications.”
She is not concerned about the delay of the readout from the previously expected Q3 date, as it should only be a few weeks. After speaking with management, Yang concludes that the results should be released in mid-Q4 2018 rather than late Q4.
“Given the complexity of clinical trials with multiple moving parts, it often is a very difficult task to predict the timing of a trial completion. With no change to the trial design, we are not concerned about the slippage on the timeline by a few weeks.”
Market value: $169.8 million
TipRanks consensus price target: $6 (87% upside potential)
TipRanks consensus rating: Moderate Buy (See Details)
If you are looking for a cheap biotech stock, it’s worth checking out Tetraphase Pharmaceuticals (TTPH, $3.21). This biotechnology companies designs novel fully synthetic tetracycline compounds to develop life-saving medicines.
The most exciting drug candidate is Xerava, a broad-spectrum antibiotic for the treatment of life-threatening infections, including those caused by multidrug-resistant (MDR) Gram-negative bacteria. And an upcoming PDUFA date has prompted a bullish note from top B. Riley FBR analyst Madhu Kumar (view Kumar’s profile & recommendations).
He writes: “We continue to believe lead asset, antibiotic Xerava, has substantial potential utility in complicated intra-abdominal infection (cIAI), with an upcoming August 27, 2018, PDUFA data as a key potential positive catalyst for TTPH shares.”
So far the signs are positive, as Xerava has demonstrated “striking clinical efficacy” across multiple Phase III studies. With this in mind, Kumar reiterated his “Buy” rating and $6 price target on Aug. 3.
Market value: $1.5 billion
TipRanks consensus price target: $17.25 (222% upside potential)
TherapeuticsMD (TXMD, $5.35) is a unique biotech committed to advancing women’s health. Right now, that translates into a particular focus on menopause. Its TX-001HR is a novel drug for treating vasomotor symptoms (VMS) related to menopause. The drug is currently being investigated for approval by the FDA- and we can expect a decision before the year-end.
According to Cantor Fitzgerald’s William Tanner (view Tanner’s profile & recommendations) “The drug’s PDUFA date is October 28 and we believe the likelihood of FDA approval is high. … We believe TX-001 possesses the clear advantage, vs. compounded estrogen plus progesterone (E+P), of potentially being the only FDA-approval E+P product.”
Before this critical date, the company is planning to release new data on the drug. “Management noted that novel data from clinical testing that speak to effects on weight gain, blood pressure and other metabolic parameters will be presented at NAMS (San Diego, October 3-6),” Tanner writes.
TherapeuticsMD also recently released Imvexxy for menopausal pain. According to Tanner, uptake of this “important treatment” will also play a big role in determining shares’ direction over the next 12 to 18 months.
Market value: $43.9 billion
TipRanks consensus price target: $195.67 (10% upside potential)
Vertex Pharmaceuticals (VRTX, $177.51) is focused on developing cutting-edge therapies for cystic fibrosis. This rare, life-threatening genetic disease affects more than 70,000 people worldwide. And on Aug. 15, the FDA will announce whether it approves lumacaftor and ivacaftor for the treatment of cystic fibrosis in children ages 1 and 2. Longer-term, look out for a mid-2019 filing for the VX-659 and VX-445 triple drug regime.
Following robust Q2 earnings, Oppenheimer analyst Hartaj Singh (view Singh’s profile & recommendations) reiterated his "Buy" rating on Vertex. He also ramped up his price target from $180 to $200 (15% upside potential). He acknowledges that “on various measures, VRTX looks expensive.” However, that analysis just doesn’t do justice to Vertex’s potential.
Singh believes the big picture remains very compelling: “VRTX has the best sales/earnings momentum profile in large-cap biotech in 2018/20E and beyond. By 2020E, we should see a doubling of FY17 sales and a tripling of Non-GAAP EPS. By 2023E – depending on speed of triplet uptake – sales could quadruple and earnings sextuple, with room for upside.”
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