As the number of new COVID-19 infections spikes, so has market volatility. An uptick in cases in the U.S. and China has spurred the latest burst of swings, with both the S&P 500 and Dow Jones following up their three-session winning streaks by heading back to the red on Wednesday.
That being said, one group of stocks has been steadily gaining traction. Small-caps, or names with market caps below $2 billion, have led the pack, with the Russell 2000’s rebound from its March 23 low point exceeding the S&P 500’s gain over the same time period.
Taking all of this into consideration, we set out to find compelling small-cap stocks that combine a low cost of entry with the Street’s backing. Using TipRanks’ database, we pinpointed two that fit the bill. Not only are the tickers currently going for less than $8 apiece, but each has also received enough bullish support from analysts to earn a “Strong Buy” consensus rating. The upside potential at play here isn’t too shabby, either.
Operating within the biotech space, ContraFect is primarily focused on developing biologic therapies for drug-resistant infectious diseases, especially those treated in hospital settings. With multiple key near-term catalysts, some analysts believe that at $6.50 per share, its price tag reflects an attractive entry point.
Writing for Cantor, analyst Louise Chen describes her enthusiasm for this name as “infectious." Pointing to the readout of Phase 3 data for exebacase (CF-301), the advancement of CF-370 into and through clinical trials and the identification of an IND candidate for its amurin peptide program, she believes these events could prompt upwards earnings revisions, should the results be favorable.
Looking more closely at the first, exebacase is a direct lytic agent (DLA), or group of enzymes targeting the bacterial cell wall leading to immediate bacterial cell death. The candidate showed that it can produce a significant improvement in MRSA patient responder rates, and demonstrated robust levels of safety and tolerability in a Phase 2 study. As a result, Chen thinks the chance of positive results in the Phase 3 DISRUPT study is high.
Expounding on this, Chen stated, “We estimate U.S. base case peak sales could be ~$700 million by year five, and in the upside case, peak sales could be ~$1.5 billion. CF-301 has Breakthrough Therapy designation for MRSA bacteremia, Fast Track designation and streamlined development from the FDA.” She added, “Positive Phase 3 data from one study could be enough for U.S. FDA approval.”
Speaking to the strength of CFRX’s pipeline, resistant infections increase mortality and costs, and Chen estimates that global mortality was 700,000 in 2016, with this figure expected to reach 10 million in 2050. On top of this, her projections put annual costs in the U.S. at $20 billion and at €1.5 billion in the EU. “New anti-infectives need: 1) superiority data vs. SoC, 2) to show a mortality benefit and 3) to show positive health economics. Currently approved antibiotics do not check these boxes, while CFRX's pipeline will address all these aforementioned factors,” the analyst explained.
To this end, the analyst rates ContraFect an Overweight along with a $15 price target. This target implies shares could soar 135% in the next year. (To watch Chen’s track record, click here)
All in all, other analysts are on the same page. 3 Buys and no Holds or Sells add up to a Strong Buy consensus rating. Meanwhile, the $16.33 average price target, which is more aggressive than Chen’s, puts the upside potential at 156%. (See ContraFect stock analysis on TipRanks)
Corbus Pharmaceuticals (CRBP)
The second stock on our list is Corbus Pharmaceuticals, which develops innovative therapeutics to treat inflammatory and fibrotic diseases. Based on its promising programs, several analysts are getting on board.
Representing BTIG, analyst Dae Gon Ha tells investors that this name has been flying relatively under-the-radar. However, given the potential of its lead candidate, lenabasum, this could change.
Data from the Phase 3 RESOLVE-1 study evaluating the therapy in systemic sclerosis (SSc) is set to come this summer. Even though the study has been controversial due to the change in endpoint, the analyst argues that “on balance see the change as logical grounded on empirical evidence and physician opinion.” Ha added, “The optics of a changed endpoint notwithstanding, we think the upcoming study is sufficiently powered (>95%) to show clinical efficacy combined with a favorable safety profile.”
On top of this, the candidate is also being assessed as a treatment for dermatomyositis (DM). “Behind SSc, DM represents another rare rheumatic disease with a significant market opportunity. Similar to SSc, promising Phase 2 findings were followed with a Phase 3 trial implementing some adjustments (i.e., primary endpoint). Yet despite the differences between SSc and DM, shared features such as multi-organ involvement, skin manifestations, and rampant inflammation suggest that SSc efficacy may provide some readthrough to the probable outcome in DM,” Ha commented.
It should also be noted that CRBP has ongoing trials in cystic fibrosis (CF) and systemic lupus erythematosus (SLE), which are being funded externally by the CFF and NIH, respectively. In addition, when comparing the company to Chemocentryx, Ha thinks that if the SSc data de-risks DM, it will imply that CRBP has “an attractive risk/reward profile”.
Everything that CRBP has going for it prompted Ha to join the bulls. Initiating coverage with a Buy recommendation, the analyst also set the price target at $22. Should the target be met, a twelve-month gain of 180% could be in store. (To watch Ha’s track record, click here)
Turning now to the rest of the Street, other analysts also take a bullish approach. CRBP’s Strong Buy consensus rating breaks down into only Buys, 4 to be exact. The average price target of $26.50 suggests shares could skyrocket 237% from the current share price of $7.82. (See Corbus stock analysis on TipRanks)
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