Healthcare Business

4 Speculative Biotechs With Huge Analyst Targets

Investors have been in love with the speculative biotech sector for years now. If there is one group of stocks that can produce returns of 100%, 200% or even ten-baggers, it is biotech. That being said, biotech and emerging pharma stocks may be among the most likely of all speculative stocks to implode and disappear.

24/7 Wall St. reviews dozens of analyst research reports each day of the week. Of the stocks to buy, we often see upside targets of 10% or 20% in S&P 500 stocks. Then there is the small cap universe with stocks under $10, where upside calls can come with projections of 30%, 50% or even 100% or more upside.

In the speculative small-cap biotech sector, the calls are often accompanied with upside price targets of 50%, 100% or even 200%. This is because the companies are often all-in bets on one or two treatments. And these companies can implode and vanish in a very short time. Analyst calls of this sort are not meant at all for risk-averse investors.

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This past week, there were four speculative biotech analyst picks in the small-cap universe with massive upside projections. One was less than 50% projected upside, but one was nearly projected at 200%. Again, these are all very speculative calls — even for the speculative biotech sector.

Array BioPharma Inc. (NASDAQ: ARRY) was reiterated as Outperform at Wells Fargo, and the price target range for a value was put at $9.50 to $10.50 in the call. That is handily higher than the $7.47 close on Friday, and much higher than the lows of about $6.50 this past week. Wells Fargo said that its target is a blend of 25 to 30 price-to-earnings (P/E) ratio and a sum of the parts applied to expected 2020 earnings per share (EPS) of $0.77 and revenues of $542 million. Wells Fargo went on to say that its ex-U.S. partnership and positive Phase 3 NEMO data could make the second half of 2015 a stellar six months for Array’s shares. Array’s consensus analyst target price is $10.14.

Onconova Therapeutics Inc. (NASDAQ: ONTX) was started with a Buy rating and price target of $6.00 at H.C. Wainwright last week. What investors need to consider is that this was versus a $2.26 close and a $2.37 end-of-week price, leaving much more than 100% in implied upside, if the call turns out to be accurate. On the other hand, Onconova has $51 market cap, and its volume is so small at 45,000 shares per day that this does not meet parameters for many investors. Onconova has a 52-week range of $2.15 to $5.78. Of the handful of analysts covering the stock, the price targets range from $3.00 to $6.00, making Wainwright’s call the most aggressive.

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Tonix Pharmaceuticals Holding Corp. (NASDAQ: TNXP) was started as Buy at Janney Capital Markets this past Wednesday. The firm assigned a $10 fair value target in the call, versus a prior $6.03 closing price and Friday’s closing price of $6.06. Tonix does not quite have a $100 million market cap, it trades about 90,000 shares per day, and its 52-week range is $5.33 to $15.21. As far as what Janney sees here: Tonix is developing TNX-102 SL, a low-dose, sublingual reformulation of cyclobenzaprine for the treatment of fibromyalgia and post-traumatic stress disorder (PTSD). It missed the primary endpoint in their Phase 2b in fibromyalgia, but Janney said that it has confidence that the Phase 3 will read out positive given the study design and new primary endpoint. The firm also believes the PTSD indication offers a unique opportunity as the Tonix Phase 2b study focuses on a military population.

XTL Bipharmaceuticals Ltd. (NASDAQ: XTLB) was started as Buy and with a $6.00 price target at H.C. Wainwright on Friday of this week. What should stand out the most here is that XTL Bio closed at $2.02 before the call was made, but shares rose over 11% to $2.25 after the report was made. XTL has a 52-week range of $1.55 to $5.00, but investors who are cautious, even in the realm of speculative biotechs, better pay attention to the $29 million market cap here. Also, H.C. Wainwright was XTL’s sole placement agent for a $4 million private placement at the end of March, when the company sold American depositary shares at $2.25, with a warrant to buy a half share at $2.25 (versus a $2.24 prior close). XTL is based in Israel and XTL is focused on late stage clinical development of drugs targeting lupus, multiple myeloma and schizophrenia.

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