For years, one of the most dependable sectors, especially for investors who are more conservative, was health care. That included the top pharmaceutical and biotech stocks. However, over the past five years, the sector, while delivering positive total returns, has massively underperformed the more popular sectors, like technology.
Biotechnology was a huge laggard last year, with the Nasdaq Biotechnology Index up a tiny 0.03% and the SPDR S&P Biotech exchange-traded fund was down a stunning 20%. Compare that with the massive 28.68% gain for the S&P 500 and the 22.21% gain for the Nasdaq, and you can bet those holding the top stocks are disappointed. The good news is that just 15 stocks make up 40% of the S&P 500 market capitalization, and inexpensive biotechnology leaders may be just the remedy for investors looking for value in 2022 in what is a very expensive stock market.
The biotechnology team at Truist Securities is out with its five top picks for 2022. For growth stock investors with a higher degree of risk tolerance, these may be just the right path to some sensational 2022 performance. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
This is a top play for investors looking for winners in the diabetes arena. CRISPR Therapeutics AG (NASDAQ: CRSP) is a gene-editing company, focusing on developing transformative gene-based medicines for serious human diseases.
The company develops its products using Clustered Regularly Interspaced Short Palindromic Repeats (CRISPR)/CRISPR-associated protein 9, a gene-editing technology that allows for precise directed changes to genomic DNA. It has a portfolio of therapeutic programs in a range of disease areas, including hemoglobinopathies, oncology, regenerative medicine and rare diseases.
The company’s lead product candidate is CTX001, an ex vivo CRISPR gene-edited therapy for treating patients suffering from transfusion-dependent beta thalassemia or severe sickle cell disease in which a patient’s hematopoietic stem cells are engineered to produce high levels of fetal hemoglobin in red blood cells. It also develops CTX110, a donor-derived gene-edited allogeneic CAR-T therapy targeting cluster of differentiation 19 positive malignancies; allogeneic CAR-T programs comprising CTX120 targeting B-cell maturation antigen for the treatment of relapsed or refractory multiple myeloma; and CTX130 for the treatment of solid tumors and hematologic malignancies
The Truist report noted this:
We are bullish on cell therapy for diabetes being pursued by CRSP, in partnership with ViaCyte (Private). While earlier iteration of the technology, using the encapsulation strategy was suboptimal, results using next generation strategy, PEC-Direct (VC-02), reported at ADA 2021 were encouraging with material improvements. VC-02 led to insulin production in serum glucose dependent manner and increased time in range from 54% to 88% and reduced A1c from 7.4% to 6.6%. VCTX210, currently in clinic, was developed in collaboration with CRISPR for stealth to bypass the need for chronic immunosuppression.
The Truist Securities price target for CRISPR Therapeutics stock is $220, while the consensus target is $151.56. The stock popped almost 5% on Monday to close at $79.24.
Aggressive investors looking to grab a bigger position may want to focus on this company. Marinus Pharmaceuticals Inc. (NASDAQ: MRNS) a clinical-stage pharmaceutical company focused on developing and commercializing therapeutics to treat rare seizure disorders.
Its clinical-stage product candidate, ganaxolone, is an allosteric modulator of GABAA, developed in formulations for two routes, including intravenous and oral for adult and pediatric patient populations in acute and chronic care, and in-patient and self-administered settings.
Ganaxolone acts at synaptic and extrasynaptic GABAA receptors, a target for its anti-seizure, antidepressant and anxiolytic potential. It is developing ganaxolone for status epilepticus, cyclin-dependent kinase-like 5 deficiency disorder, PCDH19-related epilepsy, tuberous sclerosis complex and postpartum depression. The company has license agreements with Purdue Neuroscience and CyDex Pharmaceuticals.
The analysts noted this:
Oral ganaxolone remains on track for potential approval on PDUFA goal date of March 20, 2022. Also, Phase 3, RAISE study topline in refractory status epilepticus (RSE) remains on track for the second half of 2022, for which we continue to have high conviction. The company saw the greatest reduction in short interest within our coverage in 2021, dropping from 17.4% to 3.4%.
Truist Securities has a $40 target price, well above the $29.89 consensus target. The share price ended Monday at $13.04, which was just shy of a 10% gain on the day.
This off-the-radar biotechnology company is poised to have multiple Phase 3 clinicals out this year. Relmada Therapeutics Inc. (NASDAQ: RLMD) focuses on developing various products for the treatment of central nervous system diseases and other disorders. Its lead program is REL-1017, is a new chemical entity and novel N-methyl-D-aspartate receptor channel blocker for the adjunctive or monotherapy treatment of major depressive disorder in adults.
The analysts had this to say:
The company’s lead drug REL-1017 is on track to report results from 3 Phase 3 studies in 2022 for which we have high conviction. Ph3, RELIANCE III will report results from monotherapy study in the second quarter and RELIANCE I and II will report results from duplicate adjunct studies in the third and fourth quarter of 2022. Stock is up 21% in December after removal of financing overhang post upsized equity financing of ~$173 million.
The $90 Truist Securities price target compares with the $65.86 consensus and Monday’s closing print of $23.67, which was up just over 5% for the day.
Numerous catalysts could be in play for these shareholders this year. Ultragenyx Pharmaceutical Inc. (NASDAQ: RARE) focuses on the identification, acquisition, development and commercialization of novel products for the treatment of rare and ultra-rare genetic diseases in the United States.
Ultragenyx’s biologic products include Crysvita (burosumab), an antibody targeting fibroblast growth factor 23 for the treatment of X-linked hypophosphatemia, as well as tumor-induced osteomalacia. Its Mepsevii is an enzyme replacement therapy for the treatment of children and adults with mucopolysaccharidosis VII, and its Dojolvi for treating long-chain fatty acid oxidation disorders.
The company also is developing DTX401, an adeno-associated virus 8 (AAV8) gene therapy clinical candidate for the treatment of patients with glycogen storage disease type Ia. DTX301 is an AAV8 gene therapy product candidate for the treatment of patients with ornithine transcarbamylase, while UX143 is a human monoclonal antibody for the treatment of osteogenesis imperfecta and GTX-102 is an antisense oligonucleotide for the treatment of Angelman syndrome. UX701 is for the treatment of Wilson disease, and UX053 is for the treatment of glycogen storage disease type III.
The analysts said this:
Ultragenyx Pharmaceuticals is materially ahead of the competition in Angelman syndrome, which is on the larger end of the rare disease spectrum with approximately 20K patients in the U.S. Based on our diligence, we think the company also has a strong intellectual property estate. With $34/sh ascribed to Angelman program, on a 50% risk-adjusted basis, in our SOTP valuation, Angelman program is the single greatest contributor to our price target for the company. We expect positive data by mid-2022, largely recapitulating prior data sans the safety issues given improved dosing regimen.
Truist has set a $185 price target. The lower $142 consensus target for Ultragenyx Pharmaceutical stock is still well above Monday’s close at $86.40.
Shares of this small-cap clinical-stage biopharmaceutical company could have monster upside potential. Viking Therapeutics Inc. (NASDAQ: VKTX) is focused on the development of novel therapies for metabolic and endocrine disorders.
Its lead drug candidate is VK2809, an orally available tissue and receptor-subtype selective agonist of the thyroid hormone receptor beta, which is in Phase 2b clinical trials to treat patients with biopsy-confirmed non-alcoholic steatohepatitis, as well as non-alcoholic fatty liver disease.
The company also develops VK5211, an orally available non-steroidal selective androgen receptor modulator that is in Phase 2 clinical trials for the treatment of patients recovering from non-elective hip fracture surgery. Its VK0612 is an orally available Phase 2b-ready drug candidate for type 2 diabetes, and VK0214 is an orally available tissue and receptor-subtype selective agonist of the thyroid hormone receptor beta for X-linked adrenoleukodystrophy.
The Truist team has covered this company for years and said this:
Shares of VKTX have been trading sideways as investors have been waiting for VK2801’s Phase 2b 12 week MRIPDFF study data in biopsy proven NASH patients. Slow enrollment due to the pandemic has been weighing down on the shares. However, we think enrollment completion in 2022 is possible with data readout ~16-20 weeks post enrollment completion, possibly by year end 2022. Based on our diligence, we think the Phase 2b data will be highly competitive, if not qualitatively superior to that reported by resmetirom, being developed by Madrigal.
The Truist Securities price objective is $28. The consensus target is $20.10, and Viking Therapeutics stock closed Monday at $4.88, a gain of just over 6% for the day.
These are five top picks in a sector that performed horribly over the past year. There is a range of prices here, so aggressive growth investors have a lot to choose from. Note that biotech investing is only suitable for very risk-tolerant investors. Clinical failures can absolutely crush a stock, so it is wise to use only the capital dedicated for high-risk ideas. However, it is clear portfolio managers were doing some bargain buying to start the year, with four of the five stock posting solid gains.
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