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All Contents © 2018The Kiplinger Washington Editors
By Harriet Lefton
| March 19, 2018
According to top analysts on the Street, these five “Strong Buy” biotech stocks are primed for outsized growth in the next 12 months.
Biotechs often present intriguing, and potentially 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. To minimize this risk, we specifically searched for stocks with a high degree of confidence from Wall Street’s top analysts.
In this case, we used the popular Trending Stocks tool to filter for best-rated stocks in the last week, regardless of market capitalization. The best part about this tool is that it clearly displays the upside potential from the current share price to the average analyst price target.
So we crunched the data and pinpointed these five compelling biotech stocks that are trending right now. All five stocks share a bullish Strong Buy analyst consensus rating. Note that this is based only on analyst ratings from the last three months.
With this in mind, let’s delve deeper into why the Street is so bullish on these stocks right now:
Prices and data are from the original InvestorPlace story published on Mar. 14. Click on ticker-symbol links in each slide for current prices and more.
This slide show is from InvestorPlace, not the Kiplinger editorial staff.
TG Therapeutics (TGTX) is focused on the development of novel treatments for B-cell malignancies and autoimmune diseases. Following strong Q4 results, five-star HC Wainwright analyst Edward White ramped up his price target from $33 to $38 (130% upside potential) on March 8.
His reasoning for the valuation is a bit complex, but ultimately it is based on the success and potential revenue of the company’s two main drugs ublituximab and umbralisib. Both are currently in Phase 3 clinical development. White explains: “We use the net present value of our revenue forecast through 2026, apply a 55% probability of success (POS) for ublituximab in CLL (Chronic Lymphocytic Leukemia), a 45% POS for umbralisib in CLL, and a 25% POS for both ublituximab and umbralisib in NHL (Non-Hodgkin Lymphoma), to arrive at our $38 price target.”
Bear in mind that so far White has struck gold with his TGTX recommendations. Across his 20 ratings on the stock he scored a 90% success rate and 44.4% average return. Meanwhile B.Riley FBR’s Madhu Kumar selects TGTX as an Out the Gate 2018 Pick, due to his “reasonable confidence in success in the Phase III UNITY-CLL trial, with interim data expected in 2Q18.”
In the last three months, four analysts have published buy ratings on TGTX. No hold or sell ratings here. And with an average analyst price target of $27.50, on average analysts are predicting 67% upside from the current share price.
Innovative women’s healthcare company, TherapeuticsMD (TXMD), is launching important therapies for menopause-associated conditions. The company has just scored a big regulatory win. On March 8, the FDA announced that it is accepting an NDA (new drug application) for TX-001HR without noting any ‘potential review issues.’ Now the key date to keep an eye on is Oct. 28, 2018, when the FDA will either approve or reject the application.
“We view the revenue opportunity for TX-001 (hot flushes of menopause) to be several times larger than that for TX-004 and believe prevailing compounding regulations and compounder willingness to prescribe branded drugs could benefit TXMD” states top Cantor Fitzgerald analyst William Tanner. He sees the stock spiking a whopping 400% to hit $28 from the current share price of just $5.50.
In the meantime, TXMD’s other pipeline product, TX-004, has its approval date on May 29. This is a critical barometer for the success of TX-001 according to Tanner. He says: “we view the importance of the FDA’s action around that date to be of Brobdingnagian proportion.” This is because any response short of approval will lead to stock selling.
Bear in mind, the stock has unanimous support from the Street. In the last three months five analysts have published buy ratings on TXMD. Their average price target of $15.50 works out at 190% upside from the current share price of just $5.35.
Clearside Biomedical (CLSD) develops first-in-class drug therapies to treat blinding eye diseases. The stock is already up by a massive 80% year-to-date. Shares surged from just above $6 at the end of February to over $14 at the beginning of March. The catalyst: positive results in a late-stage trial to improve vision in patients with back of the eye swelling – otherwise known as macular edema.
The company revealed that 47% of patients administered the suprachoroidal CLS-TA treatment, could see at least 15 letters, compared to just 16% for patients with the placebo. CLSD now plans to file a marketing application with the FDA in Q4.
But don’t worry it’s not too late to profit from the stock’s meteoric rise. Top Wedbush analyst Liana Moussatos has just ramped up her price target to $29 on the news. This indicates further upside potential of 137%. She believes the results further validate CLSD’s micro-injection technology.
Moussatos commented, “In addition to several positive Phase 2 trials in ME-NIU, ME-RVO and DME, the PEACHTREE trial results represent the first clinical success at the Phase 3 level. Vision gain from suprachoroidal CLS-TA was observed as early as 30 days and maintained throughout the 6-month study. Due to the strength of the Phase 3 results, we consider clinical risk for the pipeline to be reduced.”
Overall, CLSD boasts six back-to-back buy ratings. Analysts (on average) see the stock soaring 80% to hit $22.80 in the coming months.
Why have one eye drug company when you can have two?! Ocular Therapeutix (OCUL) has a clear goal: to pioneer a new era of drug delivery in ophthalmology. OCUL is currently trading at a bargain price of just $6.37. However, analysts are projecting big upside potential of 115% in the coming months. The company has received three buy ratings in the last three months.
Right now, OCUL has 1 approved product (ReSure Sealant for cataract incision closure) and 6 pipeline products. The big hitter here is Dextenza for the treatment of post-surgery eye pain and inflammation. Although the FDA rejected the drug’s first new drug application (NDA), everything is now on track for resubmission in the first half of 2018. The company has worked closely with the FDA to resolve all the issues. Luckily for OCUL, the FDA’s comments have not required any substantial change in its manufacturing or regulatory plans.
On this basis, five-star BTIG analyst Dane Leone sees Dextenza obtaining US regulatory approval by the end of 2018. The upshot is potential market entry for the drug as early as 2019. And from a financial perspective, the company raised $37 million additional capital in January, which provides a cash runway well into 2019.
Last but not least comes ‘Strong Buy’ stock Flex Pharma (FLKS). Flex develops treatments for cramps and spasms associated with severe neurological diseases including ALS, MS and CMT (Charcot–Marie–Tooth disease).
Top HC Wainwright analyst Andrew Fein has just reiterated his Flex buy-rating with a very bullish $40 price target. Given that the stock is currently trading at just $5, this indicates huge upside potential of over 680%. He is confident in the ‘mechanistic rational’ of the company’s spasm reduction FLX-787 therapy.
“Catalysts on deck in MS, ALS, and CMT may provide near-term inflection points” according to Fein. Prepare for the read-out data from FLX-787’s exploratory Phase 2 spasticity study in multiple sclerosis to hit later this month. Later down the line, in early 2019, investors are looking to results from two Phase 2 trials in patients with ALS and CMT.
“All these activities in the pipeline may provide near-term inflection points, and signal to us that the company is making solid strides, and is committed, to transitioning into a pharmaceutical company from a consumer company” cheered Fein on March 8.
Flex boasts four recent buy ratings with just one analyst sticking to the sidelines. The $17.50 average analyst price target is over 200% from the current share price.
This article is from Harriet Lefton of InvestorPlace. As of this writing, Lefton did not personally hold a position in any of the aforementioned securities.
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