Biotechnology stocks have a tendency toward very strong up and down moves, and last year the industry reversed the down momentum that started in 2015 and actually outperformed the S&P 500. Many on Wall Street feel that the U.S. repatriation tax break will help the large-cap companies bring back billions of dollars, which could increase mergers and acquisitions activity. That could be big news for some of the smaller players that have promising drugs in the pipeline.
In a series of new research reports, JPMorgan analysts Tazeen Ahmad and Jessica Fye make the case that three top companies they cover have some powerful catalysts that could drive performance this year. All three are rated Overweight at JPMorgan.
Rumors have flown for some time that this may be a potential acquisition target. Alexion Pharmaceuticals Inc. (NASDAQ: ALXN) develops and commercializes life-transforming therapeutic products.
It offers Soliris (eculizumab), a monoclonal antibody for the treatment of paroxysmal nocturnal hemoglobinuria (PNH), a genetic blood disorder, and atypical hemolytic uremic syndrome, a genetic disease. It also provides Strensiq (asfotase alfa), a targeted enzyme replacement therapy for patients with hypophosphatasia, and Kanuma (sebelipase alfa) for the treatment of patients with lysosomal acid lipase deficiency.
On Thursday the company announced successful results from a Phase 3 clinical trial assessing ALXN1210 in patients with paroxysmal nocturnal hemoglobinuria (PNH). The data showed ALXN1210 to be noninferior to Soliris (eculizumab) by virtue of achieving the co-primary endpoints of transfusion avoidance and normalization of lactate dehydrogenase levels, a direct marker of complement-mediated hemolysis in PNH.
The JPMorgan price target for the shares is $176, and the Wall Street consensus price objective is $158.50. The stock was trading early Friday at $129.90.
Many top analysts are positive on this small-cap company. Amicus Therapeutics Inc. (NASDAQ: FOLD) is an orphan disease focused biotechnology company based in Cranbury, New Jersey, with assets in late stages of development. Lead asset migalastat is an oral small molecule for the treatment of Fabry disease. Its pipeline asset is the combination ATB200/AT2221 for the treatment of Pompe disease.
The analyst is positive on the potential for the Fabry drug, and said this in the report:
Looking forward, given recent financing, we continue to believe that a non-pivotal trial path forward for Pompe program is likely to emerge, and thus we see potential to realize meaningful upside from both revenue models being pulled forward as well as the additional validation of the strength of the existing data.
JPMorgan has a $19 price target, and the consensus target is set at $19.92. The shares traded at $14.80 Friday morning.
This is another stock that has pulled back sharply and offers an outstanding entry point. Radius Health Inc. (NASDAQ: RDUS) is a development stage biopharmaceutical company focused on therapies for the treatment of osteoporosis and other endocrine-mediated diseases.
Last year the FDA approved the company’s abaloparatide-SC marketed as Tymlos for the treatment of postmenopausal women with osteoporosis at high risk for fracture. The label includes a “black box” warning for risk of osteosarcoma, as expected, given a similar warning seen with Eli Lilly’s Forteo. Favorable nonvertebral response compared to Forteo is not in label, but published literature can be used to promote drug use.
The analysts cited the pull-back in the shares as a solid buying opportunity:
The shares have pulled back following the announcement that initiation of elacestrant pivotal study has slipped to the second half with the study design changed to potentially support both EU and US approval vs just US (prior study start guidance was early ’18). While data is pushed out and the new study design potentially raises the bar relative to single-arm, we still see good potential for elacestrant to succeed based on the strong data thus far in heavily pre-treated patients.
They noted this on traction for Tymlos:
Tymlos scripts traction continues to build and we see the recent clarity on the path forward for the Tymlos TD patch as bolstering long-term story for the stock. With little credit in the stock for both elacestrant and the Tymlos patch, we see a meaningful upside in the shares driven by the inflecting Tymlos launch and pipeline progress.
The massive $60 JPMorgan price target compares with the consensus price objective of $49.57. The stock was last seen trading at $35.95 a share.
These three top companies have solid catalyst potential and already have shown good clinical results on their leading assets. While not suitable for accounts unless they have a very high risk tolerance, they are solid plays for aggressive investors.