Investment banker Barclays announced it has initiated coverage of 20 U.S. specialty pharmaceuticals stocks.
But which 20 stocks within this sector are we talking about today? They include generic drugs companies Mylan (MYL), which Barclays rates Overweight (i.e. 'buy') and Teva Pharmaceutical Industries (TEVA), which the analyst rates Underweight (i.e. 'sell'), as well as:
- Amneal Pharmaceuticals (AMRX)
- Endo International (ENDP)
- Reddy's Laboratories (RDY)
- and Mallinckrodt plc (MNK)
Each of which is rated Equal weight (i.e. 'hold').
Within the animal health sector (i.e. veterinary medicine), Barclays initiates coverage with Overweight ratings on Zoetis (ZTS) and Kindred Biosciences (KIN), but gives Phibro Animal Health Corporation (PAHC) an Underweight rating.
Among developmental and commercial stage companies "with unique products & segments," Barclays has two 'sells' -- Allergan (AGN) and Evolus (EOLS) -- and one hold: Ligand Pharmaceuticals (LGND). As for Barclays' 'buy' ratings, it rates the following companies Overweight ratings:
- AMAG Pharmaceuticals (AMAG)
- Jazz Pharmaceuticals (JAZZ)
- Osmotica Pharmaceuticals (OSMT)
- Coherus BioSciences (CHRS)
- Pacira BioSciences (PCRX)
- Revance Therapeutics (RVNC)
- Bausch Health Companies (BHC)
- and Foamix Pharmaceuticals (FOMX)
Today, we really only have time to glance at just one of these stocks: Rehovot, Israel-based Foamix.
Foamix is a late clinical-stage specialty pharmaceutical company focusing on foam-based medications for the treatment of acne and rosacea. Foamix stands out in this report primarily by virtue of the extremely high hopes Barclays' has for it, namely, valued at just $2.53 per share today, Barclays believes that within a year, Foamix stock will be selling for $10 -- a four-bagger in just one year.
Why is Barclays so optimistic? As the analyst explains, Foamix is on the cusp of becoming a "commercial stage company" -- i.e. a company with actual revenue from sales, a rarity in small drugs stocks -- thanks to its topical Minocycline product for acne and rosacea. Designated "FMX-101" for acne treatment and "FMX-103" for rosacea, both these foam-based products "combine [the] proven efficacy of minocycline with a more tolerable side effect profile" says Barclays. From $3 million in annual revenue today, the banker predicts Foamix could do as much as $272 million in annual sales by 2025E.
Considering that the entire company has a market cap of barely half that number -- $138 million -- today, Foamix at least seems to have earned its place on Barclays' list.
Foamix has a few upcoming catalysts that could send its shares surging higher:
- There is a scheduled PDUFA for FMX-101 on October 20, 2019. This is a key event for Foamix, as FMX-101 is its lead product in acne.
- Foamix anticipates filing an NDA in mid-2019 for FMX-103 in moderate-to-severe papulopustular rosacea.
- FCD-105 Phase II study initiation in mid-2019: FCD-105 is another pipeline product being evaluated in patients with acne and is a foam-based combination of minocycline and adapalene.
"We value Foamix on a DCF basis, assuming an 11.5% discount rate and a 3% terminal growth. We include risk adjusted pipeline values for both FMX-101 (90% probability of success) and FMX-103 (70% probability of success). We also assume base uptake of FMX-101, reaching 2025 risk-adj. sales of ~$200mm. This scenario yields a value of ~$10/share and serves as the basis for our price target," Barclays noted.