It’s no question that the biotech space is booming. According to Global Market Insights, the global biotech market is expected to reach $775 billion by 2024, up from $399.4 billion in 2017. While they tend to be more volatile, biotech stocks can offer substantial upside given the fact that a single positive catalyst can send shares soaring.
For a few biotechs, positive trial results might just be that catalyst. Wall Street analysts have pinpointed 3 biotech stocks that have seen share prices rise recently in response to new positive data. Each of these stocks has garnered support from the rest of the Street with a “Strong Buy” analyst consensus. This consensus is generated using the last three months’ worth of ratings from all other analysts.
With investors on average allocating 2%-6% of their portfolios to these biotechs based on TipRanks Smart Portfolio users, we wanted to learn more about the 3 stocks highlighted by analysts.
Should you invest now? Here’s the low-down.
Moderna (MRNA- Get Report) uses messenger RNA (mRNA), or molecules that transfer the instructions needed to make proteins located in DNA, to tell patients’ own cells to create proteins to treat, cure or even prevent diseases such as cancer, cardiovascular disease, infectious diseases as well as other rare diseases.
Since its September 12 announcement that its Phase 1 Cytomegalovirus (CMV) and Chikungunya programs demonstrated promising results, shares jumped 10% higher. CMV affects one in 150 newborns and can cause jaundice, poor liver function, microencephaly, pneumonia and several other symptoms. Chikungunya is spread through mosquito bites with symptoms including fever and joint pain.
According to Needham’s Alan Carr, the CMV vaccine represented a “potent vaccine and compares favorably to the that of the Merck V160 attenuated vaccine”. Adding to the good news, management stated that it expects rapid progression through a Phase 2 trial to a single registration trial to test the vaccine’s ability to prevent the spread of infection from pregnant women to their babies. As there currently aren’t any treatments or vaccines for CMV, these results are an important milestone for MRNA.
In addition, its Chikungunya vaccine looks solid as it demonstrated antibody production similar to that of its preclinical program in non-human primates. The analyst believes this could translate to other programs in earlier stage development including methylmalonic acidemia (MMA), which Carr deems the “next clinical catalyst for the stock”.
“Both sets of data represent an important step forward for the company,” he explained. The three-star analyst also cites its ongoing immuno-oncology programs for melanoma and ovarian cancer as important areas to watch. All of this lends itself to his conclusion that MRNA could see massive gains. As a result, he reiterated his Buy rating and $28 price target on September 13. He sees 55% upside potential for MRNA.
Wall Street appears to be on the same page. MRNA boasts significant support from the Street as it has only received Buy ratings in the last three months, giving it a ‘Strong Buy’ analyst consensus. Its $33 average price target indicates 80% upside potential.
Cytokinetics (CYTK- Get Report) wants to use muscle activators to improve the muscle function in patients suffering from cardiovascular disease and neuromuscular diseases. While shares dipped 1% on September 20, the company has achieved 106% growth year-to-date.
On top of its already impressive year-to-date gain, CYTK shares have surged 5% in the last five days after it announced data from the Phase 1 study of its CK-274 drug in healthy patients at the annual Heart Failure Society of America (HFSA) meeting. The results suggested that the drug was well-tolerated and met safety requirements. Based on the data, the company can move forward with its Phase 2 clinical trial to treat patients with obstructive hypertrophic cardiomyopathy (HCM), an inherited condition that causes part of the heart to get thicker affecting its ability to pump blood.
Its competitor MyoKardia’s (MYOK) mavacamten drug has already gone through a Phase 2 trial, but it should be noted that CYTK’s drug offers a shorter half life as well as a shallower dose response relationship, which is good news for CYTK.
With CYTK expected to start the Phase 2 trial by the end of 2019, Needham analyst Chad Messer takes a bullish stance on the biotech. As a result, he reiterated his Buy rating and $16 price target on September 16. His price target only suggests 23% upside potential as it doesn’t include the recent findings. The four-star analyst only factored in its omecamtiv mecarbil drug, which was created from a collaboration with Amgen (AMGN), into CYTK’s price target as this drug has already gone through seven Phase 2 clinical trials. He deems CYTK’s early pipeline as strictly upside.
Wall Street sees even more potential when it comes to CYTK. With 5 Buy ratings vs 1 Hold received in the last three months, CYTK has a ‘Strong Buy’ analyst consensus. In general, the Street forecasts 55% upside based on the $20 average price target.
The last biotech stock on our list has developed an allogenic T-cell immunotherapy to target cancerous or diseased cells rather than healthy cells. Atara (ATRA- Get Report) hopes to use this treatment for patients with cancer, autoimmune diseases as well as viral diseases.
While its 54% year-to-date decline is alarming, some analysts point to its 4% climb since it reported new data on September 13 as a step in the right direction. On September 13, ATRA announced initial efficacy data and new safety data from its ongoing Phase 1 study of its ATA188 drug at the Congress of the European Committee for Treatment and Research in Multiple Sclerosis (ECTRIMS). The drug was designed to treat patients with multiple sclerosis (MS), a chronic neurological autoimmune disease that can cause vision problems and muscle weakness.
ATA188 targets B cells infected with Epstein-Barr Virus (EBV) which is thought to play a role in the development of MS. The results demonstrated a favorable safety profile as well as significant efficacy, with its second cohort exhibiting clinical improvement. These results combined with its completion of the fourth and final Phase 1 dose escalation cohort could be a potential catalyst for the company as MS affects more than two million people globally.
While Roth Capital analyst Anthony Butler notes that he would have liked to see more granular data, he believes the results are promising. Following this development, the four-star analyst reiterated his Buy rating and $30 price target on September 13. The price target reflects his confidence in ATRA's ability to gain 90% over the next twelve months.
The rest of the Street is just as bullish. ATRA boasts a ‘Strong Buy’ analyst consensus and a $35 average price target, implying 119% upside potential.