The stock market just keeps going up, up and away. COVID-19 continues to have a choke hold on the economy, yet stocks have pulled off an incredible recovery, with the S&P 500 up 50% since its March low point. But can the index keep the rally alive?
Credit Suisse’s global equity strategy analyst Andrew Garthwaite says yes, noting that by the end of next year, the S&P 500 could “easily hit 3,500 on our models.” He believes there won’t be a major correction, and that “the key is whether you want to buy into dips or sell into rallies and we want to buy into dips.”
Why should investors keep buying? “We’re going to get a combination of easy money, easy fiscal, with yield curve control — i.e. fiscal QE [quantitative easing] — until unemployment returns to politically acceptable levels,” Garthwaite explained.
Against this backdrop, Wall Street pros argue that certain sectors are holding up substantially better than the rest, and within these areas, compelling plays can be found. Highlighting the healthcare space, the pros say there are names that have not only received a lot of love from the analyst community, but also stand to deliver hefty returns through 2020 and beyond.
As these stocks tend to be riskier in nature, we narrowed our search to include only the best of the best, according to the analyst community.
TipRanks’ database revealed three such stocks that won’t break the bank.; each one trades for less than $5 per share and has earned a “Strong Buy” consensus rating from the Street’s pros. If that wasn’t enough, plenty of upside potential is at play here.
Gritstone Oncology Inc. (GRTS)
With the goal of stomping out cancer once and for all, Gritstone Oncology develops personalized immunotherapies to fight multiple cancer types. Currently going for $3.45 apiece, several members of the Street believe that the share price reflects an attractive entry point.
Looking at the company’s clinical activity, GRTS is conducting a Phase 1 dose escalation of its GRANITE (personalized vacccine targeting cancer neoantigens) and SLATE (off-the-shelf cancer vaccine targeting shared “hotspot” neoantigens) in patients with advanced cancer. Updated data from July indicated that some patients had experienced prolonged stable disease and/or tumor regression, but none had risen to the level of a RECIST response.
Weighing in on the results for H.C. Wainwright, analyst Sean Lee wrote, “In our view, GRANITE and SLATE are both safe and showed encouraging signs of efficacy, which should warrant further study in larger patient populations. Both GRANITE and SLATE are well-tolerated, and as of the June 30 data cut-off date, zero dose limiting toxicities (DLTs) have been reported in the GRANITE study and only two DLTs had been reported in the SLATE study... Therefore, we believe the 50% decline in GRTS stock price on July 13 to be an overreaction which has created an attractive buying opportunity.”
Going forward, GRTS will kick off single-arm Phase 2 studies for both GRANITE and SLATE in advanced cancer in 2H20. For GRANITE, the study will include two cohorts of MSS-CRC patients with prior FOLFOX/FOLFIRI therapy and GEA patients with prior chemotherapy. Based on the fact that checkpoint inhibitors have either no (MSS-CRC) or very little (GEA) activity in GI tumors, management has stated that if multiple responses in these cohorts are observed, it would demonstrate additive efficacy and could ultimately support accelerated approval.
As for SLATE, GRTS is set to evaluate the original cassette of SLATE (Cassette v1) in ovarian cancer patients with the TP53 mutation and NSCLC patients with prior immunotherapy/chemotherapy. A new version of the SLATE cassette (Cassette v2) designed to optimize the immune response to KRAS mutations will also be assed.
“The Phase 2 GRANITE study is expected to report data in 2H21, and the results from Phase 2 studies of SLATE Cassette v1 and Cassette v2 are anticipated in 1H21 and 2H21, respectively. In our view, all of these could be major catalysts for the stock,” Lee commented.
To this end, LEE rates GRTS a Buy along with a $16 price target. Should his thesis play out, a potential twelve-month gain of 365% could be in the cards. (To watch Lee’s track record, click here)
Other analysts are also optimistic about the stock. GRTS' Strong Buy consensus rating breaks down into 3 Buys and no Holds or Sells. In addition, the $14 average price target brings the upside potential to 307%. (See GRTS stock analysis on TipRanks)
PDS Biotechnology Corporation (PDSB)
Using its patented Versamune platform, PDS Biotechnology develops innovative infectious disease (ID) vaccines and cancer immunotherapies. Based on its impressive technology platform and $4.35 share price, it’s no wonder this name is scoring the Street’s attention.
5-star analyst Geulah Livshits, of Chardan Capital, is even more optimistic after a recent call with PDSB’s CMO Dr. Lauren Wood.
Highlighting the takeaways from the call, Livshits points out that it’s important to consider the similarities between cancer and ID pathogens. Part of the problem when it comes to developing cancer-targeting vaccines is that many cancer antigens are also present in normal tissue, with the immune system failing to view these self-antigens as foreign. “As such, a key gating factor for developing cancer vaccines, which can translate over to ID vaccine development, is triggering innate immunity (specifically type I interferon signals),” the analyst explained.
According to Dr. Wood, T cell responses are often longer-lived than antibody responses. Livshits wrote, “Although the field does not yet fully understand what that means for immunity duration (or indeed what titer levels are sufficient for protection from SARS-CoV-2), the efficient induction of a high quality T cell response may promote longer lasting immune memory, potentially translating to longer protection or a milder disease course upon subsequent exposure.”
That’s where PDSB comes in. Versamune is an adjuvant designed to overcome the mechanisms that suppress the innate immune response, specifically triggering type I interferons. In both cancer and ID, Versamune triggers “excellent presentation of antigens” by both the class I and class II pathways, creating potent, broad and long-lived T cell responses, as well as antibody responses.
Also encouraging, the platform can stimulate the immune system locally (in the skin) when delivered, with Dr. Wood also noting that “Versamune's adjuvant tech can be co-formulated and delivered with other platforms beyond protein/peptides, including DNA or mRNA, to enhance immunogenicity.”
Looking at its performance in a clinical setting, there has been a documented triggering of type I interferons associated with HPV tumor regression in a clinical mouse model, verified immune memory demonstrated by mice resistant to tumor re-challenge, high levels of specific CD8 killer T cells within two weeks of a single dose of vaccine and T cell regression of virus-mediated lesions. Versamune has also been well tolerated.
Adding to the good news, in preclinical studies, when Versamune was co-delivered with Fluzone, a seasonal influenza vaccine, neutralizing antibody titers were 40x higher compared to Fluzone alone. Livshits added, “With regard to SARS-CoV-2, initial preclinical data in mice show the Versamune-based Covid-19 vaccine candidate induces robust neutralizing antibody response levels equivalent to those observed in recovering Covid-19 patients within 2 weeks of vaccination.”
It’s clear why Livshits continues to take a bullish stance. In addition to keeping a Buy recommendation on the stock, the price target remains at $10. The implication for investors? Upside potential of 150%. (To watch Livshits’ track record, click here)
With 3 "buy" ratings against just 1 "hold," PDSB shares have earned their Strong Buy consensus rating. Meanwhile, the $7.32 average price target implies shares could climb 83% higher in the next twelve months. (See PDSB stock analysis on TipRanks)
Hoping to improve the lives of patients with unmet medical needs, GlycoMimetics develops small-molecule glycomimetic product candidates. According to Wall Street analysts, at $3.86, its share price could present investors with an opportunity to get in on the action.
Standing squarely with the bulls is Roth Capital’s Zegbeh Jallah. Following the analyst’s virtual meeting with the management team, he is confident in GLYC’s long-term growth prospects.
Pointing to GLYC’s Phase 3 Rivipansel asset, which was designed as a treatment for patients with Sickle Cell, Jallah argues that there is a substantial market opportunity. In the U.S., there are roughly 100,000 sickle cell patients, with some of these hospitalized 1-3 times per year for painful vaso-occlusive crisis (VOCs). Opioids are the current standard of care, but there are significant concerns regarding dependency. “We believe that a need exists for treatment options that can lessen the risks associated with opioid use, without leaving patients in pain,” the analyst commented.
Currently, Rivipansel, an IV-delivered, pan-selectin antagonist, is the only therapy being clinically developed for this application. It differs from Novartis’ Crizanlizumab, a p-selectin antibody that is used to prevent VOCs, as p-selectin plays an earlier role than other selectins. “With Rivipansel more potent against e-selectin and with a half-life of 8 hours, Phase 1 data showed that its benefits were present after the onset of a VOC,” Jallah explained.
As for the Phase 2 study, the results were also encouraging. However, in the Phase 3 study, the drug failed to meet its primary endpoint of time to readiness-to-discharge. That being said, Jallah still has high hopes. Expounding on this, the analyst stated, “Encouragingly, recent post-hoc analysis showed that patients treated early in their VOC achieved a significant benefit, and management noted that similar trends were observed in the Phase 2 study where there was also a significant reduction (83%) in IV opioid use. In line with the outcomes of the post-hoc analysis, an important difference between the Phase 2 and Phase 3 studies was that patients were treated earlier in their VOC in Phase 2 than in Phase 3.”
Now that Rivipansel is wholly-owned by GLYC (the company had previously partnered with Pfizer on the program), management will discuss the next steps with the FDA as well as offer additional analysis of the Phase 3 study.
When it comes to Phase 3 Uproleselan, which has received Breakthrough Designation, Jallah believes it “could be an excellent backbone therapy to multiple agents and in multiple treatment settings of AML, with its balanced efficacy and safety profile.” He added, “...novel drugs that can allow patients to become eligible for curative transplants would be a major value-add. GlycoMimetics’ Uproleselan has the potential to do just that, as it can impair signaling that leads to resistance, allowing for multiple treatment combinations to result in deeper remissions and long-term effectiveness.” Its GMI-1359 candidate, which is currently in Phase 1, “could have potential in multiple tumor types including leukemias and solid tumors.”
With upcoming catalysts from these clinical programs and a cash runway of two years, the deal is sealed for Jallah. To this end, he maintained a Buy recommendation and $9 price target, suggesting 133% upside potential. (To watch Jallah’s track record, click here)
Looking at the consensus breakdown, other analysts have also been impressed. Based on 4 Buys and no Holds or Sells, the word on the Street is that GLYC is a Strong Buy. Not to mention the $11 average price target is more aggressive than Jallah’s and implies 187% upside potential. (See GlycoMimetics stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.