Which stocks can go from zero to one hundred overnight? Wall Street pros point to biotechs. For more risk-tolerant investors, these names represent exciting opportunities as a single positive catalyst such as promising trial results or a favorable FDA ruling can send shares skyrocketing. Naturally, a negative outcome can have the opposite effect.
As a result, it can be hard for even the most seasoned investors to gauge which biotech stocks are primed for explosive growth. Not to worry, there are strategies that can help make this process a little easier like taking a cue from the analysts.
With this in mind, we turned to Wedbush’s Liana Moussatos to get some investing inspiration. Using TipRanks.com, we got a closer look at three of her Buy-rated picks in the space that could more than double in 2020.
Aquestive Therapeutics (AQST)
Aquestive has developed a novel approach to delivering the active ingredients in established drugs using its unique PharmFilm technology. On the heels of a favorable FDA decision, Moussatos tells investors that this latest development solidified her position that now is the time to buy.
On Monday, AQST broke the news that the FDA had approved its Exservan drug for the treatment of amyotrophic lateral sclerosis (ALS), also known as Lou Gehrig's disease. The disease is characterized by the deterioration of the neurons that control voluntary muscles. As patients with ALS often have trouble swallowing, Exservan eliminates the need to do so because it adheres to the tongue and dissolves quickly.
Moussatos points out that this drug is able to meet the huge unmet need for ALS patients as it doesn’t require swallowing a tablet with water, suggesting that it could be a major profit generator. She stated, “We estimate Exservan gross sales worldwide of a little over $20 million starting in 2025.”
This comes after AQST’s solid Q3 performance featuring a revenue beat. On top of this, management bumped up its revenue guidance for 2019 to between $45 million and $47 million, up from the original forecast of $38 million to $45 million. With the sales of its already approved Sympazan drug to treat Lennox-Gastaut Syndrome (LGS) continuing to grow, Moussatos predicts that annual U.S. Sympazan sales could reach $108 million in 2027.
Based on all that, the analyst reiterated an Outperform rating on AQST while lifting the price target by $1 to $37. This implies that shares could soar a whopping 391% over the next twelve months.
In terms of other analyst activity, it has been relatively quiet. 2 Buy ratings assigned in the last three months add up to a ‘Moderate Buy’ analyst consensus. In addition, the $25 average price target puts the upside potential at 225%. (See Aquestive stock analysis on TipRanks)
Intercept Pharmaceuticals (ICPT)
Intercept is a rising star in the biotech industry, developing small-molecule treatments for progressive non-viral liver diseases.
Investors got some good news on Monday as the FDA just accepted ICPT’s obeticholic acid (OCA) NDA for the treatment of fibrosis due to nonalcoholic steatohepatitis (NASH) and granted priority review. With the PDUFA date scheduled for March 26, 2020 and a possible AdCom, Moussatos believes that big things are on the way.
“Based on robust safety and efficacy data to date, we anticipate a positive AdCom vote and approval for OCA/NASH and project potential achievement of blockbuster ($1 billion) revenue in 2024 after a potential U.S. launch in October 2020,” she commented.
At the American Association for the Study of Liver Diseases, the company presented data from its Phase 3 REGENERATE trial. The findings suggest that OCA-treated patients demonstrated continued improvement across several low-cost and noninvasive markers of fibrosis and NASH. While some patients reported that after treatment they experienced significant pruritus, or itchiness of the skin, it didn’t affect measures of quality of life.
As a result, Moussatos notes that she is staying with the bulls. Along with her Outperform rating, the analyst increased the price target from $243 to $257. This updated target conveys her confidence in ICPT’s ability to climb 167% higher in the next twelve months.
In general, the rest of the Street is in agreement. With 9 Buys and 1 Hold received in the last three months, the consensus is that ICPT is a ‘Strong Buy’. While less than Moussatos’ forecast, the $151 average stock-price forecast still indicates substantial upside potential of 57%. (See Intercept stock analysis on TipRanks)
Clearside Biomedical (CLSD)
Clearside is best known for offering a uniquely designed suprachoroidal space (SCS) microinjection platform to improve the delivery of drugs to treat various eye diseases. Its lead candidate, Xipere, was developed to treat macular edema associated with noninfectious uveitis (ME-NIU), which can threaten eyesight.
Following the company’s announcement that it had postponed its Xipere for ME-NIU NDA resubmission as a result of delays at its contract manufacturer, investors have definitely expressed concern. Back in October, CLSD received a complete response letter (CRL) for Xipere from the FDA requesting further information and analysis but not any additional clinical efficacy studies before approval. That being said, Moussatos remains optimistic as she expects potential approval and commercial launch of Xipere in the U.S. in Q4 2020 and Q1 2021, respectively.
She also notes that CLSD is planning to file an IND application sometime in mid-2020 for a proprietary suspension of axitinib (CLS-AX) for suprachoroidal injection. Axitinib is a small molecule multi-receptor tyrosine kinase inhibitor that the company hopes will be an effective treatment for advanced renal cell carcinoma.
Despite posting an EPS loss of $0.17 per share in its third quarter, the Wedbush analyst advocates patience as she sees huge gains in store based on these two programs. To this end, she reaffirmed her bullish thesis. Her $3 price target brings the potential twelve-month rise to 138%.
Looking at the consensus breakdown, analysts are split right down the middle when it comes to CLSD. 1 Buy vs 1 Hold lend itself to a ‘Moderate Buy’ Street consensus. Additionally, the $3 average price target places the upside potential right in-line with Moussatos’ estimate. (See Clearside stock analysis on TipRanks)