Needless to say the biotech world has had a very difficult year. Even the biggest and the best companies, many of which trade cheaper than big pharmaceutical companies, have suffered as investors have fled the sector. Much of the blame for the poor showing is the very shrill rhetoric from some politicians in an election year over drug pricing, and while there is always an argument for lower prices, taking down an entire sector is extreme.

Three new reports from the analysts at Wedbush focus on companies that not only have data that could prove to be huge, but they have been absolutely hammered over the last year and are offering aggressive accounts the best entry points in some time. These stocks are very speculative, and though rated Outperform, they are only appropriate for very aggressive portfolios.

Ardelyx

This company was mauled at the beginning of this year, but it now looks poised to go higher. Ardelyx Inc. (NASDAQ: ARDX) discovers, develops and commercializes minimally systemic therapeutics for the gastrointestinal (GI) tract to treat GI and cardio-renal diseases. Its lead product candidate is tenapanor, which is in Phase 3 clinical trial for the treatment of patients with constipation-predominant irritable bowel syndrome, as well as in Phase 2b clinical trial for the treatment of hyperphosphatemia or elevated serum phosphorus levels in patients with end-stage renal disease.

The company is also developing RDX022, an oral, non-absorbed potassium-binder for the treatment of hyperkalemia or elevated serum potassium. Its drug candidates in earlier stages of research and development include RDX009, a secretagogue of glucagon-like peptide-1 and glucagon-like peptide-2, as well as RDX013, a small molecule drug candidate for hyperkalemia. It has a collaboration partnership with AstraZeneca for the development and commercialization of tenapanor and an option and license agreement with Sanofi to conduct research for evaluating small molecule NaP2b inhibitors for the treatment of hyperphosphatemia in chronic kidney disease patients on dialysis.

Wedbush feels that feedback from the FDA de-risks the company’s tenapanor, which acts as an inhibitor of the sodium-proton exchanger NHE3. It also increases the likelihood that the current study will be a success, albeit with a slight time delay. The analyst feels that tenapanor could become accepted as a differential and effective treatment for hyperphosphatemia, which is an electrolyte disturbance in which there is an abnormally elevated level of phosphate in the blood.

Wedbush has a whopping $24 price target on the stock, and the Wall Street consensus target is $19.14. The shares closed most recently at $10.68.
Novadaq Technologies

This company was hit hard when its chief executive officer resigned in early July. Novadaq Technologies Inc. (NASDAQ: NVDQ) develops, manufactures and markets fluorescence imaging products for use by surgeons in the operating room and other clinical settings in the United States and internationally.

Its proprietary imaging platform is used to visualize blood vessels, nerves and the lymphatic system during surgical procedures. The company offers SPY Elite imaging system for use in coronary artery bypass, cardiovascular, plastic, reconstructive, micro, organ transplant and gastrointestinal surgeries, as well as PINPOINT endoscopic fluorescence imaging system, high-definition white-light video with SPY fluorescence imaging.

The company also provides Firefly systems for use in robotic surgery; LUNA fluorescence angiography that enables clinicians to visually assess tissue perfusion in various cardiovascular procedures; CO2 heart laser system for transmyocardial revascularization; and DermACELL tissue products for use in breast reconstruction surgeries, as well as in the treatment of diabetic foot, venous stasis ulcers and chronic non-healing wounds.

The Wedbush team feel the positive earnings reports and additional good metrics will help to alleviate investors concerns after the management change at the top. They also noted the following in the report:

Investors have been concerned that a significant portion of Novadaq’s capital sales would come from hospitals purchasing SPY Elite systems that were previously leased (or placed for free) in exchange for lower prices on consumables. However, healthy shipments of new systems, suggest that the market actually is far from being fully penetrated.

The Wedbush price target for the stock is $17, and the consensus target is at lower at $14.85. The stock closed most recently at $10.66.

NovoCure

This stock was mauled last week as prescriptions appeared to come in much lower than expected. NovaCure Ltd. (NASDAQ: NVCR) develops and commercializes treatment for solid tumor cancers therapy called the tumor treating fields (TTFields). The company markets its proprietary therapy, TTFields delivery system, under the Optune name for use as a monotherapy treatment for adult patients with glioblastoma brain cancer. NovoCure also conducts clinical trials for the use of TTFields in brain metastases, non-small cell lung cancer, pancreatic cancer, ovarian cancer and mesothelioma.

The Wedbush report notes that the 2016 National Comprehensive Cancer Network Guidelines for Central Nervous System Cancers were just updated and now include alternating electric field therapy as a treatment option for newly diagnosed glioblastoma patients. These new guidelines are expected to include the company’s TTF Fields technology.

The stock was hit hard last Thursday on concerns that prescriptions had slowed dramatically below what was expected. Wedbush suspects the decline was attributable to increased competition for patients in the United States from clinical studies. Several other large clinical studies are also in progress, thinning the patient population.

Friday’s research report also said:

We continue to remain skeptical of the benefits of immunotherapy in GBM due to the difficulty involved with generating a strong immune response in the brain, and note that the treatments (immunotherapy and Optune) could be combined (although costs would be high). We expect NovoCure’s increased physician education efforts will help to overcome these and other barriers to Optune adoption; as part of this effort NovoCure is expanding its sales force from 41 currently to 60 by year end.

The Wedbush price target was cut from $30 to $20, and the consensus target currently is higher at $28.50. The share closed Friday at $7.52, down about 7% on the day. This is a much better entry point for investors as potential negative news looks to be out of the way.

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These are three potential big opportunities for aggressive investors. There are also substantial risks should the outcomes not play out favorably. With that in mind, some smaller speculative positions could be the right play for aggressive risk tolerant accounts.

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