With one presidential debate out of the way, and more right around the corner, one thing is for sure: at one point pharmaceutical costs and pricing may come up, and once again the sector may get selling pressure as a result. The fact of the matter is that many large cap biotechs now trade cheaper than large pharmaceutical companies, and despite the political rhetoric, life-saving drugs will still be needed and paid for. The good news for investors is many top biotechs are now flat-out cheap.
In a Jefferies research report, the top growth stock picks for this week are littered with outstanding biotech companies that could be poised for some big moves. While not suitable for accounts without a very high risk tolerance, they all are rated Buy and have outstanding upside potential.
Jefferies upgraded this stock to Buy from a Hold rating back in the summer. AveXis Inc. (NASDAQ: AVXS) just went public in February and is a clinical-stage gene therapy company that engages in developing and commercializing novel treatments for patients suffering from rare and life-threatening neurological genetic diseases. Its initial product candidate is AVXS-101, a gene therapy product candidate that is in a Phase 1 clinical trial for the treatment of spinal muscular atrophy Type 1.
The company also intends to identify, acquire, develop and commercialize gene therapy product candidates for the treatment of other rare and life-threatening neurological genetic diseases. It has strategic collaboration and license agreements with Nationwide Children’s Hospital, the Research Institute at Nationwide Children’s Hospital, Regenxbio and Asklepios Biopharmaceutical.
Jefferies noted this is their report:
We found a patient we believe is in the AVXS-101 trial whose parents have posted a video of her walking. The profile of the patient lines up well with patient E.06 in the high dose cohort and who had received a perfect score, but that doesn’t mean the patient was necessarily walking, and our data suggests she is.
The Jefferies price target was raised to $52, and the Wall Street consensus target is at $53. Shares closed Tuesday at $41.
This company has a treatment for common warts that may become the first prescription treatment for the condition. Aclaris Therapeutics Inc. (NASDAQ: ACRS) is a clinical-stage specialty pharmaceutical company that focuses on identifying, developing and commercializing topical drugs to address various needs in dermatology. Its lead drug candidate is A-101, a hydrogen peroxide topical solution that has completed three Phase 2 clinical trials for the treatment of seborrheic keratosis (SK), a common non-malignant skin tumor. The company is also developing A-101 as a prescription treatment for common warts, as well as A-102, a proprietary topical gel dosage form of hydrogen peroxide for the treatment of SK and common warts.
Jefferies noted this in its report:
The Company released data on its A-101 study for common warts last week. With seemingly pristine safety data and strong response rates, we are becoming increasingly confident A-101 could become the first Rx treatment for common warts. We raise peak sales to $250 million from $75 million, raise earnings-per-share estimates for fiscal 2020 and fiscal 2021 by 51%.
The $31 Jefferies price target is less than the consensus target of $32.25. Shares closed Tuesday at $25.15.
This company had a hot 2014 initial public offering and has done outstanding since the debut. Kite Pharma Inc. (NASDAQ: KITE) is a clinical-stage biopharmaceutical company that focuses on the development and commercialization of novel cancer immunotherapy products.
The company is developing a pipeline of engineered autologous cell therapy-based product candidates for the treatment of solid and hematological malignancies. Its lead product candidate is KTE-C19, a chimeric antigen receptors (CAR)-based therapy that is in Phase 2 clinical trials for the treatment of patients with refractory diffuse large B cell lymphoma, including primary mediastinal B cell lymphoma and transformed follicular lymphoma.
The company said earlier this week that more than two-thirds of patients treated with its proposed lymphoma treatment responded to the therapy, with more than 40% showing a complete remission, according to an interim analysis of a mid-stage clinical trial.
The company is also conducting a Phase 2 clinical trial of KTE-C19 on patients with relapsed/refractory mantle cell lymphoma; a Phase 1-2 clinical trial of KTE-C19 on adult patients with relapsed/refractory acute lymphoblastic leukemia; and a Phase 1-2 clinical trial of KTE-C19 in pediatric patients with relapsed/refractory. In addition, it engages in developing T cell receptors-based therapies, which targets self-antigens, viral antigens, and neo-antigens. The company has a research collaboration and license agreement with Amgen to develop and commercialize various CAR-based product candidates.
The Jefferies team noted:
We recently attended an industry meeting and spoke with an FDA medical officer’s personal views on CAR-T therapy. She stated that duration of response is a greater focus than response rates. She also believes that cell expansion profile may differ according to patient age, which is something we haven’t heard before.
The $72 Jefferies price target is about in line with the consensus target of $72.54. Shares closed up big on Tuesday at $60.04.
This small cap company could have huge upside potential for shareholders. Medgenics Inc. (NYSE: MDGN) is a clinical stage medical technology company that engages in the research and development of products in the field of biotechnology and associated medical equipment in the United States. It develops transduced autologous restorative gene therapy (TARGT), a platform to provide protein and peptide therapies to treat a range of chronic diseases. The company’s lead product candidate is MDGN-201, which is an endogenous erythropoietin secretion TARGT that is in the Phase 1/2 clinical trials for the treatment of end stage renal diseases and other indications.
Several clinical milestones in the NFC-1 and anti-LIGHT programs are expected over the next several months. NFC-1 mGluR+ ADHD development continues at a fast rate. The genotype/phenotype study ran through more than 1,000 patients in less than four months, and the Phase 2/3 interventional study initiated enrollment in June. The Jefferies report noted:
The company is in a Phase 2/3 study for the treatment of ADHD with genetic mutations. We expect Ph 2/3 data in November, and probability weight revenues at 50% and estimate 2028 revenues of $1B.
Jefferies initiated coverage with a Buy rating and a massive $10 price objective. The consensus target is even higher at $12.25. The shares closed Tuesday at $5.63.
All these stocks have the potential for big upside and big volatility. Like all biotech companies, bad clinical data could doom them, so these are only suitable for very aggressive accounts.