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It’s a game of high stakes and high-return potential. We’re talking about investing in bargain priced healthcare stocks. For some, the risk associated with these plays is enough to keep them away. That said, other market watchers see the opportunity at hand as too enticing to ignore.
What makes these stocks risky? Given the nature of the healthcare industry, many companies rely on a few key indicators such as study results or regulatory approvals to determine if there’s a clear path forward.
Therefore, any positive development can act as a catalyst that sends shares blasting off towards the moon. Disappointing news will also send shares flying, but in the opposite direction.
Understanding the risk involved, we used TipRanks’ database to pinpoint two compelling healthcare stocks trading for less than $5 per share. Each has earned a “Strong Buy” consensus rating from the analyst community and brings massive growth prospects to the table. We’re talking about triple-digit upside potential here.
Synlogic Inc. (SYBX)
Standing at the intersection of biology and engineering, Synlogic uses synthetic biology to develop living therapeutics programmed to treat disease in innovative ways. With multiple potential catalysts on tap for the rest of 2020, some analysts believe that its $2.19 share price presents an attractive entry point.
Representing H.C. Wainwright, 5-star analyst Raghuram Selvaraju cites the initiation of the Phase 2 clinical trial of SYNB1618, its orally administered synthetic biotic medicine, in patients with phenylketonuria (PKU), a condition that causes decreased metabolism of the amino acid phenylalanine (Phe). The trial is designed to evaluate safety and tolerability as well as the therapy’s ability to lower Phe levels.
In an attempt to limit the risks associated with COVID-19, the company recently altered the trial to give patients more flexibility, with the participants now able to choose home-based or office-based visits. Management still expects to kick off the trial in 2H20.
The potential catalysts don’t end there. The continuation of dosing in the monotherapy arm of the SYNB1891 Phase 1 clinical trial, which is studying the immuno-oncology (I/O) candidate in patients with advanced solid tumors or lymphoma, could also drive significant upside, in Selvaraju’s opinion. The company is hoping to release interim data before the end of 2020.
Additionally, the analyst will be watching out for investigational new drug (IND)-enabling studies of SYNB8802, SYBX's asset designed as a treatment of enteric hyperoxaluria, which is set to enter clinical evaluation in early 2021.
Expounding on this, Selvaraju stated, “We believe that demonstration of progress with these preclinical programs may galvanize investor interest, since that would signal expansion of Synlogic's portfolio and indicate continued execution capability even under the shadow of the COVID-19 pandemic.”
To this end, Selvaraju rates SYBX a Buy, along with a $13 price target. This figure conveys his confidence in SYBX's ability to soar 504% in the next twelve months. (To watch Selvaraju’s track record, click here)
Turning now to the rest of the Street, other analysts also like what they’re seeing. 4 Buys and a single Hold add up to a Strong Buy consensus rating. Given the $9.75 average price target, the upside potential comes in at 353%. (See SYBX stock analysis on TipRanks)
Evolus Inc. (EOLS)
Relying on a customer-centric approach, Evolus is a performance beauty company that’s focused on bringing breakthrough products to market. Currently going for $3.55 apiece, now might be the time to snap up shares, so says the analyst community.
SVB Leerink analyst Marc Goodman tells clients that Q2 Jeuveau sales landed $6.5 million above his original estimate. The strong showing came as a result of a more robust recovery of normal aesthetics business across the U.S., with approximately 90% of the sales being generated in the second half of Q2 as some offices reopened after COVID-19-induced shutdowns.
Higher-than-anticipated gross margin, an 8% increase in purchasing accounts during the quarter as well as rising re-order rates also contributed to Jeuveau’s impressive performance. Even though Jeuveau has a solid standing in the U.S. neurotoxin market, and the company believes the market will continue to rebound in 2H20, year-over-year declines could still be in store. However, Goodman commented, “Given that most investors had very low expectations into Q2, we wouldn’t be surprised to see the stock uptick nicely...”
That being said, Goodman notes that investors need to have “some patience” with respect to the International Trade Commission (ITC) litigation. As no significant updates were provided by management, the analyst is waiting for the judge’s final decision on November 6, which he argues will “either be a positive ruling for Daewoong/Evolus or a settlement.” To this end, he is still “positive on the long-term prospects for Jeuveau.”
Reflecting other highlights for Goodman, EOLS customers stated that June was the best month of this year, due to high pent-up demand during lockdowns.
“Evolus used its proprietary digital platform to launch two new initiatives: (a) a consumer loyalty program ‘Evolus Rewards’ which within 30 days had over 1,300 purchasing accounts opting into the program (~30% of the customer base) and 16,500 patients enrolled, and (b) ‘Evolus 350’ promotional programs offering a flat $350 price per vial on purchases made via the Evolus Practice app. Together, these initiatives plus corporate restructuring reduced non-GAAP operating expenses by ~37% vs Q1,” the analyst noted.
In line with his optimistic take, Goodman rates EOLS an Outperform (i.e. Buy) along with a $10 price target. This target brings the upside potential to a whooping 197%. (To watch Goodman’s track record, click here)
Most other analysts don’t beg to differ. 4 Buy ratings and a single Hold add up to a Strong Buy consensus rating. The $8.40 average price target implies shares could soar 149% in the coming year. (See Evolus stock analysis on TipRanks)
To find good ideas for healthcare stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.