Searching for the stocks that can treat you to huge rewards overnight? Look no further than the biotech industry. Regardless of trade wars, economic data and market sentiment, a single positive catalyst like favorable data or an important regulatory decision can drive share prices through the roof. Just remember that these stocks carry substantial risk, too, as the opposite holds true.
Having said that, the Street’s seasoned pros remind investors that positive data doesn’t necessarily mean that a drug will receive approval from the FDA. So, when biotechs near these important FDA verdicts, it’s a signal to investors to pay close attention as drug approvals can lead to vital revenues for companies.
With this in mind, we used TipRanks’ set of investing tools to take a closer look at 3 biotech stocks ahead of their upcoming FDA approval decisions. Here’s what we uncovered.
Intra-Cellular Therapies (ITCI)
Schizophrenia is a mental illness that causes abnormal behavior, strange speech as well as a decreased ability to understand reality, with the treatment market for the disease estimated to be worth about $14.9 billion. Intra-Cellular Therapies wants to capitalize on this opportunity, and given the limited competition, several analysts argue the biotech is well-positioned to do so.
Currently, the company is preparing for the December 27 PDUFA date for its lumateperone drug in schizophrenia. Some red flags were raised when the review, originally slated for September 27, was delayed and the July AdCom meeting was canceled. However, the company stated that the delay came as a result of its submission of additional non-clinical data, which demonstrated that issues with toxicology seen in animals weren’t present when the drug was used to treat humans.
On top of this, the drug is currently being evaluated as a treatment for bipolar depression and major depressive disorder (MDD). In a Phase 3 study of its efficacy in bipolar depression patients, the drug produced a statistically significant improvement in the Montgomery-Asberg Depression Rating Scale (MADRS) total score.
Even with the delay, Ladenburg analyst Matthew Kaplan is optimistic about the drug’s approval.
“Despite this delay in the approval timeline, we continue to believe that lumateperone has demonstrated a clinically meaningful improvement and improved safety and metabolic profile over risperidone in the treatment for schizophrenia, which should ultimately support FDA approval of lumateperone,” Kaplan explained.
With this in mind, the four-star analyst kept his Buy rating and $33 price target. This brings the potential twelve-month gain to a whopping 224%. (To watch Kaplan’s track record, click here)
Similarly, the rest of the Street is optimistic about ITCI. Based on 100% Street support over the last three months, the consensus is a unanimous Strong Buy. Additionally, the $24 average price target puts the upside potential at 135%. (See Intra-Cellular stock analysis on TipRanks)
For investors familiar with biotechs, it’s clear that Amarin was one of the most talked about names in the space this year. The company has only one product on the market, but that one is a true humdinger. The medication, Vascepa, is an omega-3 based treatment for hypertriglyceridemia, with a proven record of reducing triglycerides in adult patients. Vascepa has been commercially available since 2013, and is predicted to reach $2.2 billion in annual sales by 2024.
Amarin shares were catapulted higher recently as an FDA panel unanimously voted in favor of Vascepa approval for a cardiovascular (CV) risk reduction indication, which reflected a major step forward. That being said, specifics regarding its use in primary prevention of MACE weren’t set in stone.
As the expanded label would create a huge opportunity for the biotech, Leerink Partners’ Ami Fadia sees the December 28 PDUFA date as a major catalyst, adding that the AdCom outcome has made her “incrementally more positive.” Part of the optimism is due to her belief that the panel was open minded about expanding the labeling to include use in primary prevention.
“By our count, 11 members were open to a primary prevention label of which a majority noted that they would prefer to keep the primary prevention strictly defined per the REDUCE-IT Cohort 2 studied population while a minority preferred a broad primary prevention definition. In contrast, 5 members were against including primary prevention in the label,” the four-star analyst wrote in a note to clients.
Fadia also points out that the AdCom members think that risks related to the treatment’s use could be mitigated with labeling and that the impact of mineral oil didn’t appear to dissuade a positive vote. As a result, she left the Outperform rating unchanged while bumping up the price target from $26 to $29. This new target conveys her confidence in AMRN’s ability to surge 29% in the coming twelve months. (To watch Fadia’s track record, click here)
What does the rest of the Street think? Looking at the consensus breakdown, opinions from other analysts are more spread out. 6 Buys, 2 Holds and 1 Sell add up to a Moderate Buy consensus. In addition, the $28 average price target indicates 25% upside potential. (See Amarin stock analysis on TipRanks)
Avadel Pharmaceuticals (AVDL)
Avadel Pharmaceuticals is best known for developing sleep medicines as well as sterile injectable products. Ahead of its December 15 PDUFA date for its fourth hospital product, AV001, one analyst thinks that AVDL could be bound for greatness.
The PDUFA date was originally slated for September 15, with the product being granted priority review by the FDA. However, this was pushed back after the FDA requested additional analytical data.
Ladenburg's Matthew Kaplan believes that the delay doesn’t change the fact that AV001 stands to fuel massive growth for AVDL.
“Avadel believes that AV001 corrects the safety issues of the current products in the market (one unapproved and one recently approved in May) and will address a market potential of about $30 million. We look forward to the FDA decision from the PDUFA, and we believe after approval, AV001 will start generating revenues in 2020 in addition to the existing hospital franchise (Akovaz, Bloxiverz, and Vazculep),” Kaplan commented.
Its FT218 drug also looks promising. The therapy is progressing through Phase 3 development for the treatment of excessive daytime sleepiness (EDS) and cataplexy in patients suffering from narcolepsy, with the FDA agreeing to a lower sample size needed to show statistical significance.
To this end, the four-star analyst reiterated the bullish call and $8 price target, implying 27% upside potential from current levels. (To watch Kaplan’s track record, click here)
It has been relatively quiet when it comes to other analyst activity. In the last three months, only 2 analysts have issued ratings. However, as they were both Buys, the word on the Street is that AVDL is a Moderate Buy. Based on the $7 average price target, shares could climb 11% higher in the next twelve months. (See Avadel stock analysis on TipRanks)