Health and Healthcare

20 Biopharma Stocks for Huge Upside Potential in 2020

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Now that 2020 is well underway, investors are already moving on from just thinking about how wonderful the stock market performance was in 2019 and how wonderful stocks have been for the past decade. It is quite typical with the market at all-time highs that there are difficulties and reservations about how to place investments and assets heading into the new year and new decade. Some investors are even worried that the fourth quarter’s strength may have eaten into potential upside in the stock market for 2020. That is a very natural concern, and frankly should never be ignored. That said, the 28%-plus gain of 2019 in the S&P 500 would have only been more than 10% had it been tallied from late in 2018, before the worst fourth-quarter performance took the markets lower than they should have gone.

24/7 Wall St. tracks dozens of analyst calls each day of the week, and this turns into hundreds of analyst calls over the course of a week. Some analyst calls come with Buy ratings, and the traditional Buy and Outperform ratings are generally seeing upside calls of 8% to 10% at this stage of the over 10-year-old bull market. One area of the market that can see much greater upside opportunities, which also implies a greater risk, is the biotech and emerging pharmaceutical stocks. Even some established Big Pharma and generic drug makers sometimes see outsized upside calls from Wall Street.

Many new and reiterated bullish analyst calls already have been seen in 2020. That is also true of the biotech and pharmaceutical space. We have reviewed 20 standout biopharma analyst calls that have been made since the new year. Price targets are generally 12-month targets, and each of these were given target prices that were either above consensus or were offering much larger implied gains than traditional analyst calls in that 8% to 10% range. Additional trading or call summary data have been provided on each.

There are always issues to consider with analyst calls, so please read our analyst guidance disclosure below before blindly using analyst calls as a basis for investing or trading.

Here are 20 biotech and pharma stocks that have been given big analyst upside targets for 2020.

Aimmune Therapeutics Inc. (NASDAQ: AIMT) saw its shares trade lower on January 9 based on a positive peanut allergy data release by rival DBV Tech (see below). While a 5% drop to $32.40 seems big, there is a 52-week trading range of $16.95 to $35.48, and Wedbush Securities maintained its Outperform rating and whopping $79 target, as the lead candidate is Palforzia as a potential first and best-in-class oral immunotherapy treatment for peanut allergy. Their view is that prior Palforzia exceeded the FDA 15% minimum requirement for efficacy (at 53%) and was not as positive on the competing data.

Applied Genetic Technologies Corp. (NASDAQ: AGTC) received a very upbeat call from Wedbush on January 9. The firm noted that its Outperform rating came with a $12 price target, and while that would be nearly 200% higher than the prior $4.16 closing price, its shares were up as much as 100% at $8.35 after news that its eye disorder gene therapy handily exceeded expectations in midstage trials. The stock hit a new 52-week high of almost $8.50 on 100-times normal trading volume. The firm H.C. Wainwright had issued an even more aggressive $18 target price late in 2019. Even after doubling, this stock still had barely a $150 million market cap, and more than $71 million in cash at the end of the September quarter.

Aptose Biosciences Inc. (NASDAQ: APTO) was started with a new Buy rating and a $10 price target at Piper Jaffray on January 9. This represented well over 80% in implied upside from the prior $5.32 closing price, but shares initially rose 8% to $7.75 after the call. The 52-week range is $1.576 to $6.04, and the shares had been above the prior consensus target price for this $435 million company. Aptose closed on a $74 million capital raise (at $4.00 per share) via a stock sale in December.

Avid Bioservices Inc. (NASDAQ: CDMO) was reiterated as Buy with a $10 price target at Janney on January 6. The latest price was $6.95, implying 44% upside if its analysis is correct. Avid Bio has a mere $414 million market cap, but Janney was seeing an increased strategic value in 2020 as a pure-play monoclonal producer that is still a small-cap stock competing with larger companies at a time when the global capacity for biologics manufacturing remains constrained. The firm also sees an inflection point to faster growth and profitability coming in 2020.

BioDelivery Sciences International (NASDAQ: BDSI) was assigned a new Buy rating and $9 price target by Piper Jaffray on January 9. That represented close to 58% implied upside, but its shares had risen by 5% to $5.98 after the call was made. Zacks previously talked up its upward trend in earnings estimates, just a day or two earlier.

Blueprint Medicines Corp. (NASDAQ: BPMC) was trading up over 6% at $85.90 late on Friday, a day after it got an FDA approval for a rare cancer treatment that was its lead candidate. Avyakit was approved as a treatment of unresectable or metastatic gastrointestinal stromal tumor in adults. Wedbush noted that the company is now entering 2020 as a commercial-stage player with a selective pipeline of future hopefuls as well. Wedbush sees a very slow start due to a small population targeted here, but the firm ultimately is calling for total Ayvakit sales in GIST sales surpassing $400 million in 2025. The firm’s $120 price target still represented a 40% implied upside potential to its target, and Blueprint now has a $4 billion market cap.

DBV Technologies S.A. (NASDAQ: DBVT) was raised to Buy from Hold with an $18 target price at Stifel on January 9. This was up from a $10 previous target price at the firm and compares with an $11.24 prior share closing price. DBV had a consensus target price of $15.18 ahead of the call. Its shares were initially indicated up 20% at $13.50 on Thursday morning after news of positive three-year long-term study data from a Phase 3 open-label extension study of Viaskin Peanut in children, but the stock then was seen up just about 11% at $12.50 after a competing stock analyst questioned how positive the data were in a competing call.

Endo International PLC (NASDAQ: ENDP) was upgraded to Overweight from Neutral and its target price was raised to $7 from $5 at Piper Jaffray on January 3. Endo recently traded at $4.60, implying more than 52% upside if the firm is correct. It is a $1 billion market cap company that recently launched a generic version of Afinitor tablets in the United States via its Par Pharma unit. The company’s news release from December indicated that the name brand drug saw approximately $412 million in sales over the past four quarters.

IGM Biosciences Inc. (NASDAQ: IGMS), a $1 billion market cap company that is into research and development of engineered therapeutic engineered Immunoglobulin M (IgM) antibodies, was reiterated as Overweight at Piper Jaffray on January 6. What stood out here was that the $26 target price was raised all the way up to $53. That represents about 60% upside from the recent $32.95 share price. The 52-week range is $16.10 to $57.42.

Illumina Inc. (NASDAQ: ILMN), which is the leader in gene sequencing and genomics, was started as Buy with a $385 target price in a new sector call at Citigroup. Shares recently traded at $329, for an implied upside of 17% if the Citigroup call is correct. This was one of the more bullish targets in that sector call, and some of the peer companies were viewed as Hold/Neutral positions rather than with big Buy ratings and big implied upside. On January 9, Piper Jaffray reiterated its Overweight rating and raised its target price to $370 from $340.

Iveric Bio Inc. (NASDAQ: ISEE) was started with a Buy rating and a $13 price target (versus an $8.20 close) at Wedbush on January 7. This was a $340 million market cap stock that has very little outside coverage. Wedbush sees the stock as undervalued as its lead asset Zimura is set to begin a pivotal clinical study in the first quarter of 2020 in the large geographic atrophy market with a more than $1 billion estimated opportunity from a 1 million-plus current patient population.

Kodiak Sciences Inc. (NYSE: KOD) was given a new Buy rating and a $100 target price at Jefferies on January 3. This is a $3 billion market cap stock, and the company aims to treat wet age-related macular degeneration and diabetic retinopathy. The most recent price of $67.75 would imply upside of over 47%, if Jefferies is proven correct.

Madrigal Pharmaceuticals Inc. (NASDAQ: MDGL) was raised to Buy from Neutral at UBS, and the firm raised its price target to $127 from $125 in the January 9 call. Madrigal traded up over 5% to $91.50 after the call, and some analysts have had even more aggressive target prices in the past.

Mylan N.V. (NYSE: MYL) was reiterated as Outperform and the target price was raised to $27 from $25 at RBC Capital Markets on January 7. The new target is against a recent price of $21.15, which implied about 28% upside, and is now above-consensus rather than below consensus. Mylan has suffered along with many other companies in generics and in drug pricing issues, but a long-term chart showed that it had bottomed out close to $17 in mid-2019 and again last November after having lost two-thirds of its value in the prior few years. RBC’s take is that the worst is behind Mylan, but analysts around Wall Street have a wide array of opinions and many are still doubting the company. The other side of the coin came in a January 9 call, when Piper Jaffray issued a new Neutral rating and $21 price target in a much more conservative call. Shares were trading at about $20.85 late in the first full week of this year’s trading.

Neovasc Inc. (NASDAQ: NVCN) is a tiny micro-cap outfit that recently closed on just a $10 million share offering to raise capital. On January 2, Canaccord Genuity raised its target price to $10, based on reducer expanding its medium-term revenue potential. Neovasc recently traded at $3.24, after a 7% drop from that share offering. That is still roughly 200% upside from the current price, if this very aggressive target comes to fruition. It does have a 52-week range of $2.34 to $11.00, and it is a Canada-based company.

Organogenesis Holdings Inc. (NASDAQ: ORGO) was started with an Outperform rating at Leerink on January 10, and the firm’s $9 price target implied upside of about 80% above the recent $5.00 share price. The consensus target price was actually above $10 ahead of the call, and its market cap was shown as $566 million.

Pacira BioSciences Inc. (NASDAQ: PCRX) was reiterated as Outperform along with an $85 target price at Wedbush on January 7. This call would represent almost 100% implied upside, if the call is proven correct in time from the current $42.85 share price. The driving force here is a recent study data showing Exparel used in patients undergoing Cesarean section (C-section) for postoperative pain regimen — with the firm’s understanding that the opioid-free spinal anesthesia + Exparel TAP block arm achieved statistical significance against its target for the primary endpoint of reduction in postsurgical opioid consumption.

Pfizer Inc. (NYSE: PFE) was assigned a new Outperform rating and a $46 target price at RBC Capital Markets on January 7. That compared with a prior $38.88 close, and it could help underline some of the catch-up potential this has in 2020 as Pfizer was a major underperformer and disappointment in 2019. If RBC is correct, that’s an implied 18.5% upside from the recent $38.80 share price, but that’s closer to a 22.5% implied upside for total return investors who would add in the 3.9% dividend yield.

Scholar Rock Holding Corp. (NASDAQ: SRRK) received $25 million from Gilead as a milestone payment after it demonstrated efficacy in preclinical in vivo proof-of-concept studies in their collaboration in the development of transforming growth factor beta inhibitors for fibrotic diseases. Wedbush reiterated its Outperform rating with a $23 target price (versus a $12.88 close) on January 10. Its market cap is just $393 million. Shares were trading up 1% more at $13.01 late on Friday.

X4 Pharmaceuticals Inc. (NASDAQ: XFOR) was started with a Buy rating and a $22 price target at H.C. Wainwright on January 7. This is a small $130 million market cap stock and was trading at $10.45 with very thin trading volume. It was just at the very end of 2019 that the company announced its initiation of a Phase 1b clinical trial of mavorixafor in combination with ibrutinib (Imbruvica) for the treatment of Waldenström’s macroglobulinemia, which is a rare form of non-Hodgkin’s lymphoma.

A special note for investors to heed on all analyst calls:

24/7 Wall St. has tracked analyst calls for years, and there is one truth that all investors must heed when using these calls in their research: an analyst upgrade, downgrade, initiation or reiteration should never be used as a sole reason or sole source of information for the basis of deciding to buy, sell or hold. Some analysts have keen insight and deeper knowledge than others, but some analyst calls effectively have no better information than is available to any retail or institutional investor.

Some analyst calls also end up being quite wrong, and in speculative biotech stocks that can mean that a huge potential upside call might turn into a loss of almost the entire investment. There are also many instances when brokerage firms employing analysts who cover the firms are also seeking to (or already do) have investment banking relationships with the same companies they follow.

As with all analyst calls and investment decisions, caveat emptor!

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