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All Contents © 2020The Kiplinger Washington Editors
By Harriet Lefton, Contributing Writer
| May 23, 2018
Biotech stocks often present intriguing, and potentially very lucrative, investment opportunities. Share prices can explode on positive trial results or key regulatory approvals.
However, buyers beware: These rewards can disappear just as quickly if critical data disappoints. This is especially the case for biotechnology companies with few or no marketable drugs (and thus they are generating low or even no revenues), especially if their drugs still are in the early stages of development. To minimize this risk, it’s best to search for stocks with a high degree of confidence from Wall Street’s top analysts.
Five compelling biotech stocks stand out as intriguing investing opportunities right now.
We used TipRanks’ Trending Stocks Tool to filter for the best-rated biotechnology stocks over the past few weeks, regardless of market capitalization. All five stocks share a bullish “Strong Buy” analyst consensus rating. And while all five picks have soared over the past three months, word on the Street is that we still have a long way to go.
Let’s delve deeper into these five top biotech companies:
Data is as of May 22, 2018. Consensus price targets and ratings based on “Best Performing” analysts. Click on ticker-symbol links in each slide for current share prices and more.
Market value: $225.6 million
TipRanks consensus price target: $30.00 (245% upside potential)
TipRanks consensus rating: Strong Buy
Small-cap oncology stock Syndax Pharmaceuticals (SNDX, $8.69) has massive upside potential, according to Wall Street’s pros.
Analysts are optimistic about the potential for Syndax’s lead asset entinostat, which the company is evaluating as a treatment for numerous ailments, from breast cancer to melanoma. Encouragingly, the U.S. Food and Drug Administration has already granted entinostat a “Breakthrough Therapy Designation.” This speeds up the lengthy approval process, giving the drug a better chance to make it to market.
Top B. Riley FBR analyst Madhu Kumar (view Kumar’s TipRanks profile) believes the market is undervaluing the multiple catalysts in SNDX’s oncology pipeline. He calls Syndax an “Out-the-Gate 2018” stock pick and reiterates his $40 price target. Given the current share price of $11.42, this translates into 250% upside potential. Bear in mind that Kumar has a very strong stock picking track record; he currently boasts a whopping 40% average return per rating.
SNDX recently sold off after a report on a trial testing a combined treatment of entinostat with Merck’s (MRK) Keytruda – a general population of non-small cell lung cancer patients did not do well with the treatment. However, it did fare well in a specific subset of those patients, plus the drug is being examined in another treatment combinations. Kumar also sees a potential stock catalyst in the Phase III readout for entinostat in breast cancer, expected to come in the third quarter of this year.
Market value: $1.1 billion
TipRanks consensus price target: $32.50 (135% upside potential)
TG Therapeutics (TGTX, $13.85) develops innovative treatments for B-cell malignancies and autoimmune diseases. Currently, TGTX has two advanced-stage therapeutics, one of which is TG-1101 (ublituximab), intended for numerous diseases including multiple sclerosis (MS).
TGTX recently received its most bullish call yet. Five-star HC Wainwright analyst Edward White (view White’s TipRanks profile) has published a buy rating with a $38 price target. This means extreme upside potential of 174%.
Why so bullish? White believes the “multiple sclerosis opportunity continues to look promising.” In April, TG Therapeutics revealed that 98% of the patients in a study were confirmed relapse-free after receiving TGTX’s ublituximab (TG-1101) treatment for 24 weeks.
Bear in mind that so far White has struck the jackpot with his TGTX recommendations. Across his 22 ratings on the stock, he boasts an 82% success rate and 28.9% average return.
Raymond James’ Reni Benjamin (view Benjamin’s TipRanks profile) believes TGTX is a ‘Strong Buy’ stock. He is confident that given the clinical data so far, the two pivotal trials of TG-1101 are likely to be successful. “With the Phase III UNITY-CLL study approaching an inflection point in the coming months, the potential to create value in the multi-billion-dollar MS market, and a pro forma cash position of $93.3 million, we continue to recommend shares of TGTX to risk-tolerant investors” Benjamin writes.
Market value: $321.3 million
TipRanks consensus price target: $41.00 (178% upside potential)
Allena Pharmaceuticals (ALNA, $14.76) is a niche biotech company developing oral enzyme treatments for rare and severe metabolic and kidney disorders. Top-rated Ritu Baral, a five-star analyst at Cowen & Co (view Baral’s TipRanks profile), has just reiterated her bullish support of ALNA (without a price target). With a strong cash position, on-track execution of clinical trials by management and a material clinical catalyst in 2018, ALNA shares represent an attractive investment, Baral writes.
She sees promising potential for two of the company’s key clinical trials in enteric hyperoxaluria. “We continue to be confident in a positive outcome for the ongoing URIROX-1 trial, and likely 2, and their ability to support accelerated approval,” she writes. Indeed, Baral believes the first Phase III trial of lead candidate ALLN-177 “has a good chance of success given compelling Phase 2 data.” Plus top-line trial data expected in the second half of 2019 should “meaningfully de-risk” the entire ALLN-177 program.
According to Baral, Allena has a dual advantage in respect of both its safety and efficacy profile. “The lack of absorption prevents the drug and its metabolites from accumulating in organs or the bloodstream ... Additionally, we see the gut-restriction of ALLN-177 as intuitive and likely to drive efficacy, as it acts at the relevant site (the gut) to eliminate oxalate from the body.”
Market value: $144.7 million
TipRanks consensus price target: $26.00 (90% upside potential)
Up-and-coming biopharma Eiger BioPharmaceuticals (EIGR, $13.70) is developing therapies for orphan diseases with high unmet need. The company holds a diverse portfolio of assets currently in Phase II development. With lonafarnib, EIGR is on track to become the first FDA-approved therapy for the hepatitis delta virus (HDV). This is the most severe form of viral hepatitis in humans, affecting 15 million to 20 million people worldwide. As Eiger says on its website, there is currently no approved therapy for HDV.
Oppenheimer analyst Jay Olson (view Olson’s TipRanks profile) spies several potential upcoming catalysts, including the initiation of the HDV Phase III program. He matches the consensus estimate with a $26 price target on EIGR (90% upside potential).
Olson writes, “Our Outperform rating on Eiger is based on a positive risk/reward view of its diversified orphan drug portfolio, composed of four Phase 2 assets.” Indeed, EIGR has already established early proof-of-concept data for lonafarnib as well as hypoglycemia treatment Exendin 9-39.
He continues: “Given the high level of unmet medical need for the indications Eiger is addressing and the strong preclinical/clinical rationale for efficacy, we are positive on the probability of success of the ongoing clinical trials.”
Market value: $218.9 million
TipRanks consensus price target: $17 (134% upside potential)
MiRagen Therapeutics (MGEN, $7.25) is a clinical-stage biotech developing microRNA-based therapies for cancer and other diseases. This involves modulating microRNAs – short, single-stranded molecules that regulate gene expression. Right now, MiRagen has four indications for blood cancer in Phase 1 trials (cobomarsen) as well as three fibrosis indications – one of which has completed the Phase 1 stage.
“We reiterate our belief that the Phase II SOLAR trial for cobomarsen in mycosis fungoides (MF) remains highly de-risked based on existing Phase Ib data. We further see positive Phase Ib data for cobomarsen in other blood cancers, guided for (the second half of 2018), as a key positive catalyst for MGEN shares” states top B. Riley FBR analyst Madhu Kumar. Kumar reiterated his MGEN Buy rating and raised his price target from $16.50 to $18.50 (140% upside potential).
Although the trials are progressing rapidly, this is a stock for the long haul because the money isn’t flowing in any time soon. Top Oppenheimer analyst Leah R. Cann (view Cann’s TipRanks profile) expects that the company will only launch its first product in the next five years. She writes “We estimate that MiRagen’s operating loses will continue until the launch of MRG-106 in 2022, when we estimate the company will turn profitable as revenue starts to meaningfully offset losses.” Given the probabilities of success for the different drugs, she calculates a $13 price target for the stock (69% upside potential).
Harriet Lefton is head of content at TipRanks, a comprehensive investing tool that tracks more than 4,700 Wall Street analysts as well as hedge funds and insiders. You can find more of TipRanks’ stock insights here.