Janney raised BioDelivery Sciences International Inc. (NASDAQ: BDSI) to Buy from Neutral with a $4 price target (versus a $2.45 prior close). Just do not overlook that management sold shares recently. The Janney report said:
Endo International has not yet announced, but clearly won preferred status for Belbuca relative to market leader Butrans on the Prescription Drug List at United Healthcare. … BDSI has announced five contract wins for Bunavail since July. This places BDSI on a path to show meaningful growth for Bunavail growth in 2017. As a result, our preliminary 2017 BDSI revenue estimate of $25 million shows significant improvement from our current 2016 estimate of $15 million. Based on the improved outlook we are raising our rating to Buy and maintaining our $4 fair value estimate.
BioDelivery Sciences shares closed up 10.2% at $2.70 on Friday. This call still implies right at 50% upside, even after Friday’s gain, and the 52-week range is $1.86 to $7.04.
On September 21, Ladenburg Thalmann started Aviragen Therapeutics Inc. (NASDAQ: AVIR) with a Buy rating and assigned it a $2.50 price target. The prior closing price was $1.60, and shares closed out the week at $1.66, in a 52-week range of $1.29 to $1.72.
H.C. Wainwright reiterated its Buy rating on Aviragen on September 20. The difference here is that this firm has a $5 price target. It sees upside coming as the SPIRITUS patient enrollment is 92% complete and on track to read-out at 2016 year-end. The firm also said that new Phase 1 bioavailability data supports additional vapendavir formulations, thereby allowing scaling up for Phase 3 trials. More positive points from this call were seen as follows:
New Phase 1 bioavailability data supports additional vapendavir formulations, thereby allowing scaling up for Phase 3 trials. … Aviragen anticipates to hold End-of-Phase 2 meetings with the FDA imminently after data read-out in preparation for the Phase 3 trials. … Next near-term catalyst is top-line data readout of Phase 2a RSV challenge study also at year end. … We see little read-throughs from Novavax’s trial. … Thirdly, enrollment of Phase 2 of BTA074 for condyloma continues.
BioTime Inc. (NYSEMKT: BTX) was started with a Buy rating by Ladenburg Thalmann on September 23, but what stood out was the $6 price target. This represented implied upside of 67% from the $3.59 prior close if the report’s target is achieved.
BioTime shares closed up 5.8% at $3.80 on Friday, in a 52-week range of $2.02 to $4.51. Even after shares popped on the analyst call, it still had a market cap under $400 million.
A Buy rating for Inotek Pharmaceuticals Corp. (NASDAQ: ITEK) came from H.C. Wainwright on September 20. What stood out here was the $22 price target, representing close to 150% upside. Inotek’s share price went out at $8.76 on Friday, and it has a 52-week range of $5.81 to $13.36. That report said:
Our investment thesis hinges on the success of trabodenoson (and its second product, trabodenoson in combination with latanoprost, FDC), for glaucoma. Inotek has successfully completed Phase 2 (one in 2012; the second in 2015), it started the Phase 3 MATrX-1 monotherapy trial in September 2015, and started the Phase 2 combination study in July 2016. The first big data release should come from MATrX-1 in late 2016—what we see as the primary near-term stock driver.
Our $22 target is derived by a discounted P/E methodology and would be a 200% return from current levels. Even if we’re wrong about positive Phase 3 data, with $150 million in cash (including the recent convert) and only 27M shares, it leaves approximately $5.60 in cash value, compared to the current stock price of only $8.02. Hence we see Inotek as having a beneficial risk-reward profile.
Just one final reminder: Just because analysts see huge upside targets in biotech stocks doesn’t mean that the upside thesis always plays out. And when these upside forecasts are wrong, they are often wrong with catastrophic losses.