At the very moment it looked like the market was down for the count, stocks bounced back. After being dealt hefty blows earlier in the week due to the record-breaking drop in oil prices, all three of the major U.S. stock indexes rallied on Friday April 24. The surge was supported by rising crude prices, but it wasn’t quite enough to drive a week-to-date gain, with this figure landing in the red as earnings reports revealed the economic fallout of COVID-19-induced shutdowns.
As investors digest all of this, it becomes apparent that there’s an opportunity for those able to take on more risk. Within the biotech space, the effects of COVID-19 have pushed several compelling names’ share prices lower, presenting more affordable entry points.
That being said, Wall Street pros remind market watchers that due diligence is required before making any investment decisions as both the volatile nature of the biotech industry and a bargain price tag add up to significant risk. What’s the flip side? Any favorable outcome can catapult a company’s shares through the roof, with even minor share price appreciation translating to huge returns.
Bearing this in mind, we used TipRanks’ database to find three compelling biotech stocks all trading for under $4 per share. The cherry on top? Each of the Buy-rated tickers could see their share prices take flight in the next year. Here are all of the details.
Menlo Therapeutics Inc. (MNLO)
Menlo’s recent rough going has certainly sounded the alarm bells for some investors, with it now going for only $1.41 per share. The company, which develops foam-based products to treat dermatologic conditions, recently announced that it will be discontinuing serlopitant development after the therapy failed to meet the required endpoints in two Phase 3 trials in Prurigo Nodularis Itch. However, several analysts are standing firmly behind MNLO.
Cowen’s Ken Cacciatore notes that the June 2 PDUFA date for its FMX-103 candidate in rosacea is keeping him optimistic about the biotech’s long-term growth prospects. Based on the almost perfect clinician overlap, FMX-103 can leverage the infrastructure put in place for its Amzeeq product in moderate-to-severe acne.
Expounding on this, Cacciatore said, “...our clinicians continue to highlight their even greater enthusiasm for FMX-103, given that rosacea – although a smaller overall market than acne – has very limited treatment options. Taking the likely lower penetration of Amzeeq into the massive acne market, combined with the likely high penetration of FMX-103 into the smaller rosacea market, we continue to believe that these opportunities could eventually each exceed $250 million-plus in peak sales, which is clearly not reflected in the current valuation.”
Additionally, Cacciatore points out that Amzeeq’s initial release was impressive before COVID-19 took hold of the market, with “the launch was progressing as well as – and if not better – than any recent launch in acne.” Total prescriptions hit the 2,150 mark for the week ending March 13, indicating a revenue run-rate of about $20-$25 million.
“We are encouraged by the initial response to Amzeeq, and believe it bodes well for the likely re-acceleration that will occur following the normalization post the virus pause,” Cacciatore noted
As MNLO has enough capital to establish both FMX-103 and Amzeeq, it’s no wonder Cacciatore left an Outperform rating on the stock. The analyst's $10 price target leaves room for shares to skyrocket 609% in the next year. (To watch Cacciatore’s track record, click here)
All in all, the analyst community echoes Cacciatore’s sentiment. Only Buys have been assigned in the last three months, 6 to be exact, and thus the consensus rating is a unanimous Strong Buy. At $6.80, the average price target puts the upside potential at 382%. (See Menlo price targets and analyst ratings on TipRanks)
Aquestive Therapeutics Inc. (AQST)
Next up is biotech Aquestive Therapeutics, which uses innovative drug delivery technology to redesign important medicines. With not one but two upcoming PDUFA dates, it’s not surprising that members of the Street think its $3.55 share price represents the ideal entry point.
Weighing in for H.C. Wainwright, five-star analyst Raghuram Selvaraju believes that the most valuable piece of the puzzle is its anti-seizure candidate, Libervant, the PDUFA date for which is slated for September 27. “We estimate that Libervant could generate U.S. sales approaching $300 million by 2030. Libervant has been accorded Orphan Drug status, which would confer seven-year market exclusivity upon the product if approved,” he explained.
Regarding Libervant’s launch, Selvaraju argues the fact that Sympazan (clobazam), an oral film for Lennox-Gastaut syndrome (LGS)-associated seizures, was launched prior to Libervant provides Aquestive with the opportunity to set up its commercial infrastructure.
It should also be noted that Selvaraju sees the recent share price weakness as not fully reflecting AQST’s value, with it boasting several other promising candidates in its pipeline. “In our view, the recent coronavirus crisis-driven market disruption has resulted in massively overdone attrition in Aquestive's share price. The company currently trades at a sub-$60 million market cap, which we believe does not reflect even the value of its manufacturing and licensing-related revenue, let alone revenue generated from its proprietary products,” he commented.
One of these candidates is APL-130277, which could be approved on May 21. On top of this, AQST-108 could enter clinical testing this year, and with the annual U.S. epinephrine product market potentially totaling $5.2 billion by 2026, according to Coherent Market Insights, Selvaraju highlights the large opportunity for the biotech.
As a result, Selvaraju reiterated a Buy rating and $13 price target. Should this target be met, a twelve-month gain of 266% could be in the cards. (To watch Selvaraju’s track record, click here)
Looking at the consensus breakdown, other analysts also see big things in store. With 100% Street support, the message is clear: AQST is a Strong Buy. The $17.33 average price target is more aggressive than Selvaraju’s and suggests 388% upside potential. (See Aquestive stock analysis on TipRanks)
BioCryst Pharmaceuticals (BCRX)
BioCryst is among those racing to find an effective and safe COVID-19 treatment. Based on these efforts and its bargain $3.56 price tag, one analyst tells investors that now is the time to snap up shares.
The company has already opened up the enrollment for its randomized double-blind pbo-controlled clinical trial evaluating its galidesivir drug in patients with COVID-19. Funded by the National Institute of Allergy and Infectious Diseases (NIAID), the trial will be performed in two separate parts and conducted under an amendment to the existing clinical trial for yellow fever in Brazil to enable the study to start sooner.
The first part is designed to optimize the dosing regimen for galidesivir, while the second will hopefully validate its activity against pbo. Based on the safety, viral load reduction in respiratory tract secretions, improvement in COVID-19 signs and symptoms and clinical manifestations as well as mortality results from Part 1, BCRX will be able to select the ideal dosing regimen for Part 2. Then in Part 2, the treatment’s efficacy will be determined by time to clinical improvement, time to hospital discharge, time to undetectable viral levels (as measured by PCR in respiratory specimens) and all-cause mortality.
Writing for J.P. Morgan, five-star analyst Jessica Fye sees galidesivir as a significant positive for the company. “While no timelines for data were provided today, mgmt noted that Brazil’s infection count is inflecting and along these lines we see potential for this study to enroll relatively quickly, potentially setting up data this summer. Net-net, in light of the ongoing pandemic, we see progress on galidesivir’s development as a potential treatment for COVID-19 as a driver of near-term stock performance although we acknowledge that the value of the opportunity is difficult to quantify,” she stated.
All of this prompted Fye to leave her Overweight rating and $5 price target unchanged. With this target, shares could climb 40% higher in the next twelve months. (To watch Fye’s track record, click here)
Turning now to the rest of the Street, BCRX’s Moderate Buy consensus rating breaks down into 4 Buys and 2 Holds published in the last three months. In addition, the $7.40 average price target implies shares could soar 108% in the next year. (See BioCryst price targets and analyst ratings on TipRanks)