Are you prone to sudden surges of joy, abruptly followed by sinking bouts of misery? Do you react disproportionately to good or bad news? Well then, you might just be a biotech stock.
Known for extreme volatility, biotech stocks can be great news for the risk tolerant investor, but of course, the flipside means they can be bad news, too. So, in this tricky sector, it is hard to know how to choose the right stock to invest in.
At Stifel’s recent Healthcare Conference in New York, the investment banking firm took a deep look at some of the biotechs' latest developments. Following the conference’s close, we decided to get the magnifying glass out, and with the help of TipRanks’ Stock Screener home in on the biotech stocks Stifel singled out, but in particular, ones with a Strong Buy consensus rating. Let's dive in.
CymaBay Therapeutics (CBAY)
First up is CymaBay Therapeutics, a company on a mission to improve the lives of patients with liver and other chronic diseases. The biopharma focuses on developing innovative therapies for patients with rare conditions in which the lack of a market doesn’t cater to their medical needs. These are known as orphan diseases.
The company’s main drug is Seladelpar, currently in development for the treatment of patients with the autoimmune liver disease, primary biliary cholangitis (PBC) and nonalcoholic steatohepatitis (NASH).
As if to prove our introduction regarding biotechs’ volatility, CymaBay lost over 50% in one day in June, following mixed results from the company’s Phase 2b study in NASH, which exhibited minimal reductions in liver fat compared to placebo. Since then the stock has yet to regain a foothold on the market ladder.
Stifel’s analyst Derek Archila sat down with CymaBay management, and got the lowdown from the team regarding the Seladelpar trials. The analyst noted, “On the commercial front, management highlighted the potential of seladelpar as part of a combo therapy, with already approved therapies such as the GLP-1R agonists of SGLT2s, given NASH is a multi-factorial disease. We agree with this and see combination therapies playing a key role in treating NASH patients.” Archila further added, “Although NASH is important to the CBAY story, management indicated they view the company as an orphan disease company given seldelpar development is furthest along in PBC, with the Phase 3 ENHANCE study recently completing enrollment. We believe seladelpar has demonstrated sufficient proof-of-concept in this indication.” CymaBay remains on track to report topline data from ENHANCE 52-week study in early 2021.
Reassured by the meeting, Archila reiterated his Buy rating on CBAY along with a price target of $14. With CBAY currently trading at $5.61, this indicates substantial upside potential of 150%. (To watch Archila’s track record, click here)
It seems like the Street is with Archila on this one. With 3 Buys and 1 Hold the biotech stock has Strong Buy pasted across its label. Importantly, CBAY has an average price target of $14.25, an even slightly more bullish outcome than Archila’s target. (See CymaBay stock analysis on TipRanks)
Heron Therapeutics (HRTX)
Next up is Heron Therapeutics, a biotech developing treatments for patients suffering from cancer or postoperative pain.
The company experienced what we shall call a “biotech classic” in May, when it lost roughly 30% of its value following an FDA rejection of its experimental post-operative pain medication, HTX-011. The rejection centered around the lack of Chemistry, Manufacturing and Controls (CMC) data and was not based on clinical or safety issues.
Things are looking up though. In October the FDA accepted Heron’s NDA resubmission for HTX-011 with a PDUFA date set for March 26, 2020. The company is expecting approval and is gearing up to launch HTX-011 shortly thereafter.
Stifel’s Derek Archila recently met up with Heron’s CEO Barry Quart, who told Archila: "2020 will be a big year for the company."
The analyst noted, “The key point the CEO emphasized is that HRTX's chemo-induced nausea and vomiting (CINV) franchise (Cinvanti and Sustol) is an excellent platform to leverage for the launch of HTX-011 because the target hospitals are very similar. The strategy and tailwinds behind the launch of Cinvanti, such as improved product profile and favorable reimbursement, have produced 42% market share in a market that was 100% controlled by MRK's Emend. Similarly, management believes HTX-011 has an improved profile compared to both generic bupivacaine and PCRX's Exparel both in terms of efficacy and usability.”
To this end, Archila reiterated a Buy rating on HRTX stock alongside a $36 price target, indicating an increase of 45% from the recent share price.
There’s further good news for HRTX, as currently TipRanks gives Heron a Strong Buy consensus rating. This breaks down into a unanimous 7 "buy" ratings. With an average stock-price forecast of $45.86, the street is in even more of a bullish mood than Archila, providing ample upside of 86% from current levels. (See Heron stock analysis on TipRanks)
Completing our trio of biotechs is the Netherlands’ based Argenx. In a similar vein to both our previous choices, the biopharma focuses on patients with unmet medical needs. Its modus operandi is the development of antibody-based therapies for the treatment of severe auto-immune diseases and cancer.
Argenx’s lead drug candidate is efgartigimod, a treatment for patients with severe autoimmune disorders associated with high levels of pathogenic immunoglobulin G, or IgG. Argenx has high hopes for the drug and believes it can have a wide therapeutic impact. It is currently being investigated in MG (myasthenia gravis - a neuro muscular disease), immune thrombocytopenia (a shortage of blood cell fragments needed for normal blood clotting) and skin blistering diseases.
At Stifel’s recent Healthcare Conference, Derek Archila sat down with Argenx CEO Tim Van Hauwermeiren for a fire side chat regarding efgartigimod’s progress. The analyst noted, "The first indication it will likely be approved for is MG, for which ARGX expects Phase 3 ADAPT data in 2H20. Management has guided to a potential launch in 2021 for MG. Briefly on the launch, management expects efgartigimod to be used early in the treatment algorithm, after corticosteroids. Efgartigimod will be launched as an IV infusion but has plans to bring a SC form to market in MG.”
As a result, Archila reiterated a Buy rating on ARGX along with a price target of $154, implying about 10% upside for the stock.
All in all, the rest of the Street has an optimistic view of ARGX. The stock’s Strong Buy status comes from the 7 "buy" and 2 "hold" ratings issued over the previous three months. The upside potential lands at 11%, slightly above Archila's forecast. (See Argenx stock analysis on TipRanks)