Zacks Industry Outlook Highlights Aurinia Pharmaceuticals, Alpine Immune Sciences, Lyra Therapeutics, Harpoon Therapeutics and Journey Medical
For Immediate Release
Chicago, IL – December 12, 2023 – Today, Zacks Equity Research discusses Aurinia Pharmaceuticals AUPH, Alpine Immune Sciences ALPN, Lyra Therapeutics LYRA, Harpoon Therapeutics HARP and Journey Medical Corp. DERM.
Industry: Drugs - Biotech
Link: https://www.zacks.com/commentary/2196116/5-small-drug-stocks-to-buy-on-hopes-of-better-prospects-in-the-new-year
The drug/biotech sector has started to pick up, with the New Year expected to be better than 2023. Concerns about the impact of Medicare drug price negotiations, regular pipeline setbacks, Federal Trade Commission's increasing scrutiny of mergers and acquisitions (M&As) in the sector and macroeconomic uncertainty and inflation remain.
Nonetheless, the fundamentals of the sector remain strong, and investors are expected to come back to this defensive space eventually. Overall, we believe that rising M&A activity, rapid innovation, a more favorable regulatory environment and insulation from recession concerns shape the biotech sector, keeping stocks like Aurinia Pharmaceuticals, Alpine Immune Sciences, Lyra Therapeutics, Harpoon Therapeutics and Journey Medical Corp. afloat.
Industry Description
The Zacks Medical-Drugs industry comprises small and some medium-sized drug companies, which make medicines for both human and veterinary use. We have a separate industry outlook discussion on big drugmakers. Small drugmakers have a limited portfolio of marketed drugs or no commercial-stage drugs at all.
Some drugmakers are dependent on just one marketed drug or pipeline candidate. For such companies, upfront or milestone payments from collaboration partners — in most cases their larger counterparts — are the main source of revenues. These companies need ample free cash flow to fund their R&D activities.
Factors Shaping the Future of the Medical-Drugs Industry
Pipeline Success: The success or failure of key pipeline candidates in clinical studies can significantly drive the stock price of industry players. Successful innovation and product line extensions in important therapeutic areas and strong clinical study results may act as important catalysts for the stocks.
Strong Collaboration Partners: These companies regularly seek external partners and collaborators for complementary strengths. A partnership deal with a popular drugmaker is a good sign about the potential of small pharma companies, especially when an equity investment is included in the deal. M&A deals are in full swing in the sector, signaling growth.
Investment in Technology for Innovation: For these smaller companies, succeeding in a shifting global market and evolving healthcare landscape requires adopting innovative business models, investing in new technologies and increasing investments in personalized medicines. Over the past few years, scientific and technological advancements have made it possible to develop personalized therapies.
Other than that, adoption and information exchange through the meaningful use of health IT, development of therapies that improve overall patient outcomes and investment in developing and emerging markets are some of the key priorities for drug companies. Artificial intelligence and machine learning techniques are being used for the rapid advancement of drug discovery and target identification processes.
Pipeline Setbacks: The smaller companies have their share of risk in the form of unstable cash flows. Also, the failure of key pipeline candidates in pivotal studies and regulatory and pipeline delays can be huge setbacks for these smaller companies and significantly hurt their share price in the future.
Zacks Industry Rank Indicates Bright Prospects
The group's Zacks Industry Rank is basically the average of the Zacks Rank of all the member stocks.
The Zacks Medical-Drugs industry currently carries a Zacks Industry Rank #60, which places it in the top 24% of 251 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
Before we present you with a few top-ranked stocks to capitalize on the thriving prospects of the small and medium-sized drugmakers' space, let's take a look at the industry's recent stock-market performance and the valuation picture.
Industry Lags S&P 500, Outperforms Sector
The Zacks Medical-Drugs industry is a huge 194-stock group within the broader Medical sector. The industry has underperformed the S&P 500 but outperformed the Zacks Medical sector year to date.
Stocks in this industry have collectively declined 7.4% so far this year, while the Zacks S&P 500 composite has risen 20.7%. The Zacks Medical sector has declined 8.3% in the said time frame.
Industry's Current Valuation
On the basis of the trailing 12 months price-to-sales ratio (P/S TTM), which is a commonly used multiple for valuing these small drugmakers, the industry is currently trading at 1.97, compared with the S&P 500's 3.87 and the Zacks Medical sector's 2.97.
Over the last five years, the industry has traded as high as 4.92X, as low as 1.69X, and at the median of 2.62X.
5 Drug Stocks to Keep an Eye On
Journey Medical: This Scottsdale, AZ-based company markets eight branded and two generic products to treat some common skin conditions. Its important pipeline candidate is DFD-29, being developed for the treatment of rosacea. It has announced positive top-line data from two phase III studies. The studies achieved the co-primary and all secondary endpoints, demonstrating statistically superior efficacy over Oracea and placebo.
The studies also demonstrated the beneficial effect of DFD-29 on erythema (secondary endpoint), that is, redness, which is an important sign of rosacea severity. Improving erythema is relevant to rosacea treatment. DFD-29's significant impact on erythema reduction could prove to be the differentiating factor for DFD-29 over the current standard of care for this long-term inflammatory skin condition. The company plans to file a new drug application for DFD-29 around the end of 2023
Journey Medical's stock has risen 203.1% so far this year. The consensus estimate for 2024 loss has narrowed from 41 cents per share to 35 cents per share over the past 60 days. The company has a Zacks Rank #1 (Strong Buy).
Lyra Therapeutics: Watertown, MA-based-based Lyra Therapeutics is developing two therapies for the treatment of chronic rhinosinusitis (CRS) in late-stage studies. LYR-210 and LYR-220 are bioresorbable nasal implants designed to deliver six months of continuous anti-inflammatory medication to the sinonasal passages for the treatment of CRS, a highly prevalent inflammatory disease of the paranasal sinuses.
In September, Lyra announced positive top-line data from the BEACON phase II study of LYR-220 in CRS patients who have had prior ethmoid sinus surgery. The study met its primary safety endpoint with LYR-220 demonstrating statistically significant and clinically relevant improvements in symptom severity.
Enrollment has been completed in the pivotal phase III ENLIGHTEN I study on the second candidate, LYR-210, in CRS patients who have not had ethmoid sinus surgery, with top-line data expected in the first half of 2024. Enrollment is ongoing in the second pivotal phase III study, ENLIGHTEN II on LYR-210, also in pre-surgical CRS patient group.
The stock of Lyra Therapeutics has risen 25.1% so far this year. The consensus estimate for 2024 loss has narrowed from $1.27 per share to $1.09 per share over the past 60 days. The company has a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
Alpine Immune Sciences: Seattle, WA-based Alpine Immune Sciences has a diverse pipeline of clinical and preclinical candidates. Its lead pipeline candidate is povetacicept, a potentially best-in-class dual BAFF/APRIL inhibitor, which is being developed for multiple autoimmune diseases, such as systemic lupus erythematosus (SLE), autoimmune glomerulonephritis and autoimmune cytopenias. A key study is RUBY-3, which is a multi-cohort, open label, phase Ib/IIa study of povetacicept in IgA nephropathy (IgAN), lupus nephritis and primary membranous nephropathy.
Alpine Immune presented the first clinical data from the RUBY-3 study with povetacicept at the American Society of Nephrology Kidney Week. The data supported the candidate's best-in-class potential. Following the data presentation, Alpine Immune executed a follow-on equity offering of $150 million to bolster its balance sheet and accelerate pipeline development.
Alpine Immune plans to advance povetacicept into a pivotal study in IgAN and a phase II study in SLE in the second half of 2024. Initial data from another important study, the RUBY-4 study, on povetacicept in autoimmune cytopenias is also expected to be announced in 2024.
The stock of Alpine Immune Sciences has risen 129.1% so far this year. The consensus estimate for 2024 loss has narrowed from $1.47 per share to $1.38 per share over the past 60 days. The company has a Zacks Rank #2.
Harpoon Therapeutics: South San Francisco, CA-based Harpoon Therapeutics develops a novel class of T cell engagers, leveraging its proprietary Tri-specific T cell Activating Construct platform. The company has made significant progress in the development of its key pipeline candidates, HPN328 and HPN217, in recent months.
In October, Harpoon Therapeutics presented positive interim data from a phase I/II study of T cell engager HPN328 in patients with small cell lung cancer (SCLC) and other neuroendocrine tumor types. This was the largest data set so far for HPN328, showing compelling activity of HPN328 with the potential for best-in-class efficacy. The clinical benefit observed in the study, particularly the response data in the 1 mg priming dose cohorts, was encouraging.
Based on this data, Harpoon plans to select the recommended phase II dose or doses by the of this year to study multiple tumor types like SCLC and other neuroendocrine tumor types. Harpoon will meet with regulators in the first half of 2024 to discuss its development plans for HPN328.
Another important pipeline candidate is HPN217, which is being developed in a phase I study for relapsed, refractory multiple myeloma. In September, HPN217 demonstrated early and durable responses at the target dose of 12 mg.
The stock of Harpoon Therapeutics has risen 23.2% so far this year. The consensus estimate for 2024 loss has narrowed from $5.60 per share to $3.23 per share over the past 60 days. The company has a Zacks Rank #2.
Aurinia Pharmaceuticals: Canada-based Aurinia Pharmaceuticals makes medicines to treat autoimmune, kidney and rare diseases. It presently markets Lupkynis (voclosporin), an oral therapy for treating active lupus nephritis (LN). Lupkynis was launched in January 2021 and has seen strong demand trends ever since. Lupkynis was approved in the EU in September 2022.
Aurinia continues to study Lupkynis for use in expanded patient populations. Last month, its collaboration partner Otsuka filed a new drug application seeking approval for Lupkynis (voclosporin) in Japan.
Aurinia Pharmaceuticals has a Zacks Rank #2. The consensus estimate for 2024 loss has widened from 27 cents per share to 37 cents per share over the past 60 days. The company has a Zacks Rank #2. The stock has risen 105.1% so far this year.
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Aurinia Pharmaceuticals Inc (AUPH) : Free Stock Analysis Report
Journey Medical Corporation (DERM) : Free Stock Analysis Report
Alpine Immune Sciences, Inc. (ALPN) : Free Stock Analysis Report
Harpoon Therapeutics, Inc. (HARP) : Free Stock Analysis Report
Lyra Therapeutics, Inc. (LYRA) : Free Stock Analysis Report
