The biotech sector, like most sections of the market, took a sound beating in the year’s first half. Recently, however, the segment’s performance has improved, and that has helped the NASDAQ Biotechnology Index (NBI) pull ahead of the NASDAQ (Up 13% over the past 3 months vs. the NASDAQ’s 3%).
The Oppenheimer biotech team thinks there’s a simple explanation for this: “We believe that much of the recent outperformance has been driven by SMID caps, of which many have risen admirably in the past few months... We note a number of successful outcomes from key clinical trials in this group [Alnylam Pharma, Caribou Biosciences, Cincor Pharma, amongst others]." Furthermore, "Growing number of high-profile M&A announcements may be reinvigorating interest among specialists and generalists."
This makes Oppenheimer state that skies are looking a 'bit brighter' for the biotech industry in 2H. In fact, Oppenheimer analysts expect two names to follow in the footsteps of their peers, by releasing successful trial results shortly which could help propel them forward.
We ran both tickers through the TipRanks platform to see what the rest of the Street had in mind for them. It looks like the Oppenheimer analysts are not the only ones showing confidence; both are rated as Strong Buys by the analyst consensus with plenty of potential upside in store. So, let’s get the details.
Madrigal Pharmaceuticals (MDGL)
The first Oppenheimer pick we’ll look at is Madrigal Pharmaceuticals, a clinical-stage biopharma focused on finding novel treatments for fatty liver diseases. More specifically, the company is in pursuit of discovering a viable treatment for NASH disease (Non-Alcoholic SteatoHepatitis). This is a more advanced form of non-alcoholic fatty liver disease (NAFLD).
It is thought that around 20% of global adults are affected by NAFLD and 30% of U.S. adults; 20% of that population have NASH. Given there are currently no FDA-approved NASH-specific drugs available, there will most likely be ample reward for whoever brings a viable solution to market first.
Madrigal’s lead product candidate is resmetirom (MGL-3196), a liver-directed selective thyroid hormone receptor-ß agonist, which is currently in Phase 3 clinical studies, indicated to treat NASH. As such, the drug could potentially become the first medication to gain approval for this disease.
In June, the company presented data at the European Association for the Study of the Liver’s International Liver Congress (EASL 2022) where Madrigal announced in-depth results from the Phase 3 MAESTRO-NAFLD-1 trial double-blind/placebo-controlled segment.
Oppenheimer analyst Jay Olson notes the results were decidedly positive, highlighting the fact resmetirom drove “favorable changes in Fibroscan and MRE where the largest improvements were seen in the most advanced patients.” In fact, the analyst thinks the results lay the groundwork for an upcoming data readout.
“We believe that Ph3 MAESTRO-NAFLD-1 results provide de-risking support to the Ph3 MAESTRO-NASH biopsy study in NASH patients (N≈2,000), which is ongoing with interim results expected in 4Q22 that could potentially support subpart-H filing for accelerated approval,” the analyst explained. “Prior Ph2 data showed that decreased liver fat on MRI-PDFF translates into NASH resolution and fibrosis improvement.”
What does it all mean for investors? While Olson thinks negative results could send the stock down by ~80%, positive top-line results from the study could see the shares more than double.
Olson is evidently confident Madrigal will bring the goods. Backing the analyst’s Outperform (i.e. Buy) rating, is a $170 price target; this figure makes room for 12-month gains of a whopping 162%. (To watch Olson’s track record, click here)
It’s not as if other Street analysts are shy of predicting big things for this name, either. With 9 Buys and 1 Hold received in the last three months, the consensus is that MDGL is a Strong Buy. While less than Olson’s forecast, the $149.44 average price target still indicates substantial upside potential of 130%. (See MDGL stock forecast on TipRanks)
Milestone Pharmaceuticals (MIST)
Let’s now take a look at Milestone Pharmaceuticals, another biotech but with an altogether different remit. The company is intent on finding a treatment for arrhythmias and other cardiac conditions.
Milestone has put all its eggs in developing etripamil, a self-administered nasal spray indicated as a therapy for patients with paroxysmal supraventricular tachycardia (PSVT) and atrial fibrillation (AFib).
The drug is currently in a Phase 2 proof-of-concept study where it is being assessed for the acute treatment of AFib with rapid ventricular rate (RVR). But more importantly right now, is the more advanced program for which there is an upcoming catalyst.
Etripamil is undergoing testing in the Phase 3 RAPID trial for the treatment of paroxysmal supraventricular tachycardia (PSVT) – a condition in which the heart’s unusual, electrical “wiring” results in an unpredictable and recurring high-speed heart rate. The condition impacts the lives of around 1.6 million people in the US, and finding a solution will not only amount to a major development, but will also represent a way to lower healthcare loads and costs.
Milestone expects to report top-line data from the study midway through 2H22, and heading into the readout, Oppenheimer’s Leland Gershell likes the “risk-reward” here.
“Primary endpoint success (time to episode termination over the first 30 minutes) should complete registrational requirements and enable an NDA filing in 2023,” the analyst noted. “We believe etripamil represents an important therapeutic advance as well as a means to reduce healthcare burden and expense, and that it is poised to generate peak net sales of $500M in PSVT alone. A Phase 2 study in atrial fibrillation w/rapid ventricular rate has begun, and could pave the way to a key label expansion opportunity.”
It's no surprise, then, that Gershell rates Milestone as Outperform (i.e. Buy) along with a $16 price target. The implication for investors? Potential upside of ~84% from current levels. (To watch Gershell’s track record, click here)
It’s clear Wall Street likes this name; MIST has garnered 3 other analyst reviews recently and all are positive, providing the stock with a Strong Buy consensus rating. Going by the $14.50 average target, a year from now, these shares will be 66% more valuable than they are at present. (See MIST stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.