2019 has not been a great year to own biotech stocks (so far). Since the year began, the Nasdaq Biotechnology Index (NBI) is down more than six percentage points, against near 16% rise for the S&P 500.
But not all biotechs are created equal -- and not all biotech stocks will remain as cheap as they are today. Utilizing the Stock Screener at TipRanks to seek out strong-buy-rated stocks with incredible profit potential, we've come up with a trio of small cap biotechs with a chance to triple their share price (or more) in the coming year. Let's take a closer look:
Aurinia Pharmaceuticals (AUPH)
Based out of Victoria, British Columbia, Aurinia Pharmaceuticals is a clinical-stage biotech developing a drug called voclosporin, which it hopes will prove useful in treating lupus nephritis (LN), an autoimmune disease affecting the kidneys, focal segmental glomerulosclerosis (another kidney disease) -- or if not those, then maybe dry eye syndrome.
If that sounds to you like Aurinia hasn't quite decided "what it wants to be when it grows up" ... well, we kind of wonder about that, too. Still, the company has $131 million in the bank and minimal debt. With a cash burn rate of only $51 million, Aurinia has the better part of three years to figure itself out and get its drug to market to accomplish something.
Just recently, Oppenheimer analyst Justin Kim initiated coverage of Aurinia stock with an outperform rating on the theory that voclosporin "could become the first therapeutic approved for treatment of LN." Kim thinks the drug has a 60% chance of proving successful for that purpose, and the stock could be worth $10 a share if that's the only indication the drug is approved for. If voclosporin proves effective in treating the other two diseases, the stock could be worth even more. (To watch Kim's track record, click here)
"Considering the near-term readout of the pivotal Phase 3 LN study, we anticipate shares could re-rate following a positive primary outcome in 4Q19. In addition to an initial pipeline opportunity in FSGS and a maturing late-stage program in dry eye syndrome, we are positive on the stock’s setup into 2020," Kim opined.
All in all, Wall Street likes the risk/reward factor at play here, as TipRanks showcases a strong buy consensus rooting for Aurinia's success. In fact, the consensus of analysts following Aurinia is that this stock could triple in value over the next 12 months, rising from $5 and approaching $17 per share. (See AUPH's price targets and analyst ratings on TipRanks)
TherapeuticsMD is a somewhat different story. On the one hand, it's a higher-price stock with nearly twice Aurinia's market capitalization, and a weaker balance sheet -- $183 million in cash, and $198 million in debt -- with a much higher burn rate of $152 million per annum. On the other hand, TherapeuticsMD has several products under development, including two formulations of topical progesterone cream.
TherapeuticsMD even has products on the market, including estrogen insert "Imvexxy," for the treatment of menopause-related dyspareunia (sales of which are accelerating year over year), "Bijuva" for the treatment of menopause-related "hot flashes," and soon, "Annovera," a contraceptive insert.
Cowen analyst Ken Cacciatore commented that Imvexxy sales were growing "in line with our expectations," that the company is "making progress" with Bijuva, and that it's "optimistic" about Annovera's launch early next year. On Imvexxy in particular, Cacciatore highlighted the 41% year over year growth in paid prescriptions written, and noted that patients using the drug are refilling their prescriptions at nearly twice the usual rate for products in this category.
Despite the apparently weak balance sheet, Cacciatore believes"the company remains sufficiently capitalized to reach profitability" by the second half of 2021.
Oppenheimer Jay Olson echoes Cacciatore's tone, noting, "We believe TXMD offers a unique portfolio of women's health products that currently remains undervalued with attractive market opportunities. Based on our hypothetical SOTP analysis, we value Imvexxy at $2/share, Bijuva at $5/share, and Annovera at $1/share."
Street analysts agree, TherapeuticsMD stock could triple off of today's sub-$4 share price and approach $12 per share in the next 12 months. (See TXMD's price targets and analyst ratings on TipRanks)
Dynavax Technologies (DVAX)
Last but not least -- well actually, it is least in terms of market capitalization at just $305 million -- we come to Dynavax Technologies, which sells the hepatitis B vaccine Heplisav-B, and has a phase 2 clinical trial candidate for cancer immunotherapy (DV281) and a phase 2a candidate for asthma treatment as well (AZD1419) -- along with a phase 1 clinical trial product for the treatment of non-small cell lung cancer (DV281).
Like TherapeuticsMD , Dynavax is a company in perilous financial state, with a cash-poor balance sheet ($140 million cash, $213 million debt) and a rapid cash burn rate -- $158 million per annum. Regardless, Cowen analyst Phil Nadeau has high hopes for this one, noting that Heplisav "has been shown to be more effective and more convenient than the other currently marketed HBV vaccines in a number of Phase III trials," which suggests Dynavax may be safe from competition in this space for some time.
Indeed, already Nadeau says Heplisav is gaining market share, and predicts the drug could capture as much as $365 million of the $500 million-plus market for hepatitis B vaccines by 2024 -- a better than 70% market share.
As a result, Nadeau rates DVAX an Outperform with a $20 price target, which implies a whopping 440% upside from current levels. (To watch Nadeau's track record, click here)
"With Heplisav's label favorable, we expect it to become the market-leading HBV vaccine over time. Our consultants think that the other monovalent HBV vaccines are good, but not ideal. Although quite safe and generally effective, our consultants think they have two shortfalls: First, they are not perfectly effective, particularly in “hyporesponders” – people over the age of 40 and people with a number of diseases – for whom they provide suboptimal protection. Second, the marketed HBV vaccines require 3 (or more) doses over six months, which reduces compliance and hence protection," Nadeau noted.
Analysts following the stock believe Dynavax shares to be significantly undervalued at today's sub-$4 share price, and predict Dynavax could go to $16 next year. More than a mere triple -- this stock could quadruple in 2020. (See DVAX's price targets and analyst ratings on TipRanks)