Health and Healthcare

RBC Has 5 Biotech Stocks Rated Outperform With Up to 100% Upside Potential

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The coronavirus pandemic has cast the spotlight on the world of biotechnology stocks as researchers search for not only a vaccine, but for additional drugs that can help in the treatment of the virus. The combination of hydroxychloroquine and the antibiotic azithromycin has been used as a treatment and has shown some very positive results.

While the coronavirus pandemic will remain on the front page nationally, many of the top biotechs are working on other pipeline clinical studies. In a new series of RBC reports, the analysts refresh their thesis on many of the top companies they cover in an attempt to look past the current issues.

These five well-known companies have shares rated Outperform, and some have gigantic upside to the RBC price targets. All make sense for aggressive growth accounts looking to add biotech positions now.

Gilead Sciences

This stock is trading a very reasonable 9.36 times estimated 2020 earnings and may have a coronavirus treatment. Gilead Sciences Inc. (NASDAQ: GILD) is a biopharmaceutical company that discovers, develops and commercializes therapies for the treatment of HIV/AIDS, liver disease, cancer and inflammation. The acquisition of Kite Pharmaceutical in 2017 allowed for entry into the CAR-T space, indicating a renewed focus in oncology.

The company’s products include Stribild, Complera/Eviplera, Atripla, Truvada, Viread, Emtriva, Tybost and Vitekta for the treatment of human immunodeficiency virus (HIV) infection in adults; and Harvoni, Sovaldi, Viread and Hepsera products for the treatment of liver disease.

The company’s remdesivir may prove to be a promising COVID-19 treatment, and the World Health Organization labeled it as “the most promising” antiviral during the early days of the outbreak. But its effectiveness won’t be known until a slate of clinical trials reads out, with the first expected from China in the coming weeks.

Investors receive a 3.70% dividend. RBC has an $85 price target on the shares. The Wall Street consensus target is $75.24, and Gilead Sciences stock closed Monday’s trading at $75.28.

Intercept Pharmaceuticals

This biotech story has stayed out front on Wall Street for years. Intercept Pharmaceuticals Inc. (NASDAQ: ICPT) is a biopharmaceutical company focused on the development of treatment for chronic liver disease using its expertise in bile acid chemistry.

The lead product candidate, obeticholic acid (OCA), is approved for the treatment of primary biliary cirrhosis (PBC) and in Phase 3 trials for the larger nonalcoholic steatohepatitis (NASH), a common but often “silent” liver disease.

In the late fall of 2019, the U.S. Food and Drug Administration (FDA) accepted Intercept’s New Drug Application (NDA) for obeticholic acid (OCA) seeking accelerated approval for the treatment of fibrosis due to NASH and granted priority review. The FDA grants priority review to drugs that have the potential to treat a serious condition, and if approved, would provide a significant improvement in safety or effectiveness.

RBC noted this about the blockbuster NASH potential:

Although Intercept’s highly anticipated first-to-market OCA NASH launch may take some time to play out, especially given pandemic-related challenges, based on feedback and epidemiology we see a multi-billion dollar out-year opportunity not nearly accounted for in current valuations. We believe patience will be rewarded, and if shares remain depressed even after likely de-risking events such as the upcoming AdComm approval, and label, we believe the company could become a merger and acquisition target.

The RBC price target is a strong $117, but the consensus target is much higher at $151.45. The last trade on Monday was posted at $69.35.

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