For investors feeling perplexed by the stock market’s roller coaster ride in 2020, you’re not alone. Following up a week that saw volatility make a comeback, stocks popped for the third session in a row on June 16, surging on a historic gain in retail sales and progress on a possible COVID-19 treatment. Rumors that the Trump administration is preparing a $1 trillion infrastructure bill also helped fuel the charge forward. That said, the rally came as investors brushed off reports of a cluster of new COVID-19 cases in the U.S. and China.
Against this backdrop, finding investing inspiration can seem like a formidable task. The analysts from investment firm Needham, however, argue that even in such a confused financial environment, there are still compelling plays. Recently publishing its list of Conviction Buys, the firm, which scores a top ten spot on TipRanks’ ranking of Top Performing Research Firms, highlights several names it believes are set to outperform the broader market.
To get the rest of the Street’s take, we ran three of Needham’s picks through TipRanks’ database. As it happens, the broader analyst community is also on board, with each ticker earning a “Strong Buy” consensus rating. Not to mention substantial upside potential is also on the table.
Revance Therapeutics (RVNC)
First up we have Revance Therapeutics, which is a biotech company that is primarily focused on aesthetic and therapeutic products, including its investigational neuromodulator asset, DaxibotulinumtoxinA for injection. After announcing a new partnership, Needham thinks the healthcare name’s future is bright.
Representing the firm, analyst Serge Belanger cites its collaboration with Mylan as a key component of his bullish thesis. He reminds investors that the two companies first entered into a license agreement to develop a Botox biosimilar back in February 2018. This deal saw RVNC receive $25 million upfront, which was part of up to $100 million in regulatory and development milestones, with it eligible for up to $225 million in sales milestones and sales royalties.
Now, Mylan has decided to move forward with the collaboration, with it set to pay RVNC $30 million in cash as part of the opt-in decision. “Mylan's opt-in decision, along with the $30 million payment, is a vote of confidence for the development plan and market opportunity of the Botox biosimilar program. The collaboration allows RVNC to focus on the upcoming product launches (Daxi and Teoxane fillers) and the continued development of Daxi, while MYL takes on an increasing role to move the Botox biosimilar program forward,” Belanger explained.
As per the terms of the extended agreement, RVNC will be responsible for non-clinical development activities, clinical development for North America, the manufacturing and clinical supply of the drug, while Mylan will take on all ex-U.S. development and all commercialization activities. Approval, which could come via the 351(k) regulatory pathway, “would provide a biosimilar Botox product with access to the $3.6 billion Botox global market that includes all 13 FDA-approved Botox indications.” It should be noted that this product wouldn’t compete with Daxi, which will most likely “create a stand-alone long-acting premium neuromodulator market segment separate from current short-acting products”, in Belanger’s opinion.
The analyst added, “This is another successful milestone in a catalyst-rich 2020 for RVNC.” These catalysts include the launch of the Teoxane filler in Q3 2020, readout of the Phase 3 Daxi trial in cervical dystonia and the November 25 PDUFA for Daxi (glabellar lines).
In line with his bullish take, Belanger reiterated a Buy call and $36 price target. Should the target be met, a twelve-month gain of 58% could be in store. (To watch Belanger’s track record, click here)
Do other analysts agree with Bellanger? As it turns out, most do. 5 Buy ratings and a single Hold add up to a Strong Buy analyst consensus. At $28.20, the average price target indicates 23% upside potential. (See Revance stock analysis on TipRanks)
G1 Therapeutics (GTHX)
With a team that brings a deep understanding of the biology of cancer and extensive drug discovery, development and commercialization experience to the table, G1 Therapeutics wants to develop therapies for patients battling cancer. As the company has been able to progress on schedule despite COVID-19, Needham has been thoroughly impressed.
5-star analyst Chad Messer tells clients that GTHX is still expected to file a trilaciclib (trila) NDA in Q2 2020 and an MAA in Q4 2020 for myelopreservation in small cell lung cancer (SCLC). This means that a PDUFA date would be handed out in Q3 2020. The analyst points out that the asset has already been given Breakthrough status by the FDA thanks to its ability to preserve the bone marrow of patients receiving marrow toxic chemotherapy.
Expounding on this, Messer said, “The filing timing is unaffected by the COVID pandemic and the company has all the required data. G1 intends to market trila in the U.S. for SCLC by itself and seek an ex-U.S. partner while expanding the treatment into other tumor types and in combination with other chemotherapeutics.”
Additionally, its Phase 3 program in CRC is moving right on track, and GTHX announced that trila would be included in the I-SPY trial for breast cancer, which should kick off this quarter.
If that wasn’t enough, the monotherapy arm of the Phase 1/2 study evaluating rintodestrant is fully enrolled. “The ~40 patient combination expansion cohort (rintodestrant + palbociclib) will use the same sites and is expected to begin enrollment this quarter... Updated data from the monotherapy portion of the trial is expected Q3 2020,” Messer commented.
With its $242 million cash runway set to support the company’s operations into Q4 2021, the deal is sealed for Messer. As a result, he left a Buy rating and $74 price target on the stock. This target suggests shares could soar 252% in the next year. (To watch Messer’s track record, click here)
All in all, other analysts are on the same page. 3 Buys and no Holds or Sells add up to a Strong Buy consensus rating. Based on the $59.67 average price target, the upside potential comes in at 175%. (See GTHX stock analysis on TipRanks)
As a cancer diagnostics and pharma services company, NeoGenomics offers diagnostic, prognostic and predictive testing services to oncologists, pathologists, pharmaceutical companies and academic centers. With it recently entering into a new strategic collaboration, Needham argues that NEO’s long-term growth narrative is strong.
On May 26, NEO revealed that it would be partnering with Inivata to commercialize the InVisionFirst-Lung liquid biopsy test for treatment selection among non-small cell lung cancer (NSCLC) patients within the U.S. The product is a blood-based, next-generation sequencing (NGS) test that’s focused in NSCLC and performed on Inivata's patented liquid biopsy platform, InVision.
Covering the stock for Needham, five-star analyst Stephen Unger points out that InVisionFirst-Lung has been given a final Medicare coverage decision, effective April 8, 2020, with the contract rate expected to land at $3,500 per test. Looking at the terms of the agreement, NEO will invest $25 million that will be paid in two installments of $12.5 million, with NEO also getting a seat on Inivata's board of directors. This equity investment puts NEO’s stake in Inivata at just under 20%.
Along with the commercial rights, “NEO and Inivata will collaborate to advance the InVision liquid biopsy platform (i.e., Inivata's RaDaR assay for residual disease and recurrence monitoring) with pharmaceutical services customers.”
Weighing in on this development, Unger noted, “We view the collaboration as a clear strategic positive for NEO, demonstrating the unique value of the company's commercial scale and national presence, which encompasses all aspects of cancer diagnostic testing. The InVisionFirst-Lung liquid biopsy test is complementary to NEO's NeoTYPE Cancer Profiles (NGS tests for solid tumors) and NeoLAB Heme (NGS liquid biopsy plasma-based tests for hematologic diseases).”
As the companies are also expected to split the profits from tests performed evenly, Unger decided to stay with the bulls. To this end, he maintained a Buy rating and $33 price target. This target conveys his confidence in NEO’s ability to surge 16% in the next year. (To watch Unger’s track record, click here)
Like Unger, other analysts also take a bullish approach. NEO’s Strong Buy consensus rating breaks down into 3 Buys and zero Holds or Sells. Given the $33.67 average price target, the upside potential lands just above Unger’s forecast at 19%. (See NeoGenomics stock-price forecast on TipRanks)
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