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Let’s talk about buying low. It’s the starting point to buying low and selling high, of course, the clichéd path toward profits. But the thing about clichés is, they usually have a core of truth. And if you buy at a low price, and sell at a high price, you’ve made a profit.
The trick, for investors, is recognizing the low price, the point of entry. Conventional wisdom would suggest avoiding stocks whose share prices have bottomed out – after all, low prices happen for a reason, and share sell-offs are frequently bad news. But not always, and there are plenty of stocks with a low point of entry and sound fundamentals, offering investors a fair shot if they’re willing to shoulder the risk.
With this in mind, we’ve used the TipRanks database to search for three stocks that fit that profile. These are Strong Buys that have seen some hard times of late, with significant declines in share price. At the same time, Wall Street’s analysts remain sanguine on them – and they each have recent analyst reviews suggesting they’ll double or more in the coming year.
Zogenix, Inc. (ZGNX)
The first beaten-down stock we're looking at is Zogenix, a small-cap biotech firm researching new therapies for treatment-resistant epileptic disorders. The company’s key product is Fintepla, a new anti-seizure medication which was approved in June of last year as a treatment for Dravet Syndrome. The company is in the process of making a supplemental New Drug Application to the FDA for Fintepla, to expand the label for treating Lennox-Gastaut syndrome, another rare seizure disorder. The supplemental NDA is expected to be completed during 3Q21.
Having an approved drug on the market is typically the ‘Holy Grail’ for the small biopharma research companies. Zogenix reported a strong continuing launch of Fintepla in both the US and Europe during the second quarter of this year. The company’s total Fintepla sales hit $17.5 million during the quarter, for a sequential gain of 42%. As of the end of Q2, the company reported 290 unique prescribers of the drug – a 22% sequential gain – and over 860 total patients who have been prescribed the new drug. The company anticipates submitting an NDA in Japan by the end of this year.
Zogenix is working to expand the Fintepla label and, as noted, is in process of submitting an NDA to the FDA. Approval will allow use of the drug to treat Lennox-Gastaut syndrome. Zogenix is also pursuing this line with the European Union, and anticipates submitting the Marketing Authorization Application to the European Medicines Agency in 4Q21. The company hopes to launch the new indication for Fintepla during 1H22.
The company has an additional research track ongoing for drug candidate MT1621. This compound is undergoing clinical trials as a treatment for TK2 deficiency, a rare genetic disorder. MT1621 was the subject of Zogenix’ Type B meeting with the FDA recently, that ‘confirmed the adequacy of the proposed data packages for the NDA submission.’ TK2 represents a serious unmet medical need that Zogenix aims to fill, and the company expects to submit the NDA in the first half of next year.
Despite these signs of positive progress, ZGNX shares are down 41% over the past 12 months, and are hovering just above the 52-week low of $14.03. The fall in share price has come as the company continues to run consistent EPS losses, while Fintepla revenue is only now ramping up.
Mizuho analyst Difei Yang sees the Fintepla ramp as the key point here, and notes that the drug features growing launch momentum.
“The US launch continues to gain momentum, which gives us incremental confidence in the longer-term prospects of the FINTEPLA franchise in DS and Lennox-Gastaut Syndrome... Management highlighted increasing momentum throughout 2Q21, and noted that the month of June had the highest number of new patients referred to the REMS program to date. Should the pandemic impact remain relatively muted, we expect the FINTEPLA launch in DS to continue to gain momentum through the remainder of 2021," Yang opined.
The analyst summed up, "We continue to believe that ZGNX shares trade at an attractive entry point - particularly following another quarter of positive, accelerating launch progress.”
In line with these comments, Yang rates ZGNX a Buy along with a $55 price target. Shares could appreciate ~285%, should the analyst’s thesis play out in the coming months. (To watch Yang’s track record, click here)
Yang is no outlier here. Of the 8 analysts who have filed recent reviews on ZGNX, 6 agree that the stock is a Buy, while only 2 remain sidelined, giving the shares a Strong Buy consensus rating. ZGNX is currently trading for $14.27 and its $43.60 average price target suggests a one-year upside of ~206%. (See ZGNX stock analysis on TipRanks)
Harpoon Therapeutics (HARP)
Next up, Harpoon Therapeutics, is a biopharmaceutical research company, with a focus on clinical-stage immunotherapy. The company is working with T-cells to develop a new class of medications that will engage the patient’s immune system to combat cancers and other disease conditions. Harpoon has a proprietary platform, Tri-specific T cell Activating Construct™ (TriTAC), informing its research approach, and has two drug candidates leading the research pipeline.
These candidates, HPN424 and HPN536, are under investigation as treatments for two serious cancers of the reproductive system – metastatic castration-resistant prostate cancer and ovarian cancer, respectively. Both drug candidates have entered Phase 1/2a clinical trials. The company has four other drug candidates in earlier stages of development, and maintains an active pre-clinical research program.
In a recent update on the HPN424 program against prostate cancer, Harpoon released data showing anti-tumor activity, including circulating tumor cell reductions; step dose regimens have successfully escalated to higher doses; and the drug was safe and well-tolerated by patients. The company is on track to initiate the dose expansion cohort of the Phase 1/2a trial by the end of this year.
On HPN536, Harpoon expects to report interim data from the dose escalation phase during 4Q21, and to initiate the dose expansion cohort of the Phase 1/2 trial during the second half.
Despite these ongoing trials and early data, the company’s stock plunged 41% so far this year, and is currently hovering close to its 52-week low of $9.15.
According to Leerink analyst Jonathan Chang, the current low price represents a buying opportunity. Chang says, as his bottom line, "We still like the stock," and gets into details: “HARP summarized recent progress and reiterated guidance for data and trial milestones for the remainder of the year…. Data updates across the pipeline are expected in 2H21. We continue to believe the combination of small size, extended half-life, and stable structure positions HARP's TriTAC platform favorably within the highly competitive bispecific landscape. We have a positive long-term outlook on the stock based on HARP's differentiated platform and catalyst-rich 2H21.”
To this end, Chang rates HARP shares an Outperform (i.e. Buy), and his $25 price target indicates room for ~164% one-year upside. (To watch Chang’s track record, click here)
Overall, Wall Street is bullish on this stock. HARP has 9 recent reviews, including 7 Buys and 2 Holds, behind the Strong Buy consensus rating. Meanwhile, the $29.71 average price target suggests a robust 214% upside potential from current levels. (See HARP stock analysis on TipRanks)
Spectrum Pharmaceuticals (SPPI)
Last but not least is Spectrum Pharmaceuticals, a commercialization-stage biopharmaceutical company. The company specializes in acquiring and developing late-stage medications, and guiding them through the approval process and into the commercial use. Spectrum’s two leading products are Rolontis and Poziotinib.
Rolontis is a long-acting granulocyte colony-stimulating factor (G-CSF) used in treating chemotherapy-induced neutropenia, a serious complication for cancer patients. Poziotinib is a treatment for solid tumors. It is an orally administered irreversible tyrosine kinase inhibitor (TKI).
For investors, right now, the fate of Rolontis is the key point here. Spectrum filed the Biologics License Application in December of 2019, and in October 2020 the FDA deferred action on the application. This month, the FDA sent Spectrum a Complete Response Letter (CRL) on Rolontis, rejecting the application.
The CRL held both good and bad news for the company. On the negative side, the FDA noted ‘deficiencies related to manufacturing,’ and informed the company that it will need to inspect the manufacturing facilities again. Spectrum is seeking clarification on what exactly the FDA wants in relation to the new inspection.
On the positive side, the CRL made no mention of safety or efficacy issues with Rolontis. Spectrum is optimistic that it can meet the agency’s demands on manufacturing, and get the application back on track.
In the meantime, Spectrum continues to pursue the Poziotinib program. The company reported positive data from the ZENITH20 clinical trial in patients with brain metastases resulting from non-small cell lung cancer (NSCLC). Spectrum aims to apply later this year for FDA approval of Poziotinib as a treatment for NSCLC.
Overall, the company’s stock is down 34% over the past 12 months. That drop includes the sudden fall of 21.5% following the announcement of the CRL.
5-star analyst Edward White, of H.C. Wainwright, takes an optimistic view of SPPI stock, mainly on his interpretation of the Rolontis CRL and the drug’s prospects.
“The company is requesting a Class A meeting with the FDA, with a meeting likely to occur in mid-September, in our opinion... We continue to believe the data for Rolontis is strong, and we are confident that Rolontis will be approved; however, we are moving our commercial launch expectations back by one year. We now anticipate a Rolontis launch in 2022 with $5M in sales that year, growing to sales of $220M in 2026,” the analyst noted.
In line with his bullish stance, White puts a Buy rating on Spectrum shares, along with a $10 price target. Hitting White’s target could yield returns of ~292%. (To watch White’s track record, click here)
The Strong Buy consensus rating on SPPI is unanimous, based on 3 recent positive reviews from the Wall Street analysts. The stock is currently trading for $2.55, and the $7.33 average price target implies ~187% upside from that level. (See SPPI 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.