Needless to say, the biotech world has had a volatile 18 months. Some of the biggest and the best companies, many of which trade cheaper than big pharmaceutical companies, are still looking like top plays for investors. However, you can bet that the shrill rhetoric from politicians over drug pricing could pick up as we edge ever closer to the midterm elections.
A series of new Stifel research reports focus on three companies that have upcoming clinical data that could prove to be huge. Numerous reasons why the stocks are very attractive now are cited, and all three are rated Buy at Stifel.
The stock was hit on some recent clinical safety data, and Stifel says buy the dip. Argenx S.E. (NASDAQ: ARGX) is a Netherlands-based biopharmaceutical company that creates and develops a pipeline of differentiated antibody therapeutics using its discovery platform, Simple Antibody, which exploits characteristics of the llama immune system. The pipeline of antibody therapeutics is focused on cancer and autoimmune indications.
The safety issue hit the stock hard, and Stifel noted this:
We think investors are overreacting to the additional safety data disclosed from efgartigimod’s Phase 2 study in immune thrombocytopenia (ITP) and would be buyers on the weakness. Although, we recognize it may take additional data, which the company expects to present at the American Society of Hematology (ASH) in December, for some investors to get more comfortable, we know: (1) patients treated with efgartigimod in the study and who were in response (had a platelet count of 50×10^9/L) did not experience bleeds.
The Stifel price target is a massive $139, but the Wall Street consensus target is even higher at $150.26. The stock closed Thursday at $80.20 a share.
This company is partnering with a big pharmaceutical company, and the data have been very solid. Neurocrine Biosciences Inc. (NASDAQ: NBIX) is a biopharma company focused on developing and commercializing therapies for neurological and endocrine disorders. The company’s lead asset is Ingrezza, approved for the treatment of tardive dyskinesia and in development for the treatment of Tourette syndrome.
The company also partnered with AbbVie on elagolix, in development for the treatment of endometriosis and uterine fibroids, and is developing opicapone as an adjunct therapy for Parkinson’s disease. Stifel noted this:
We recently hosted an investor meeting with CEO Kevin Gorman, CFO Matt Abernethy, CCO Eric Benevich, CMO Eiry Roberts and CBO Kyle Gano. The primary area of focus of our meeting was the opportunity for and probability-of-success for valbenazine in Tourette’s syndrome (TS), where ahead of data in December we’ve recently become more bullish based on our additional research. A key point of discussion during our meeting was the smart trial design the company has employed in TS: (1) conservative statistical powering, based on other successful studies in the space, (2) interim looks for dose optimization, mitigating the risk that tripped the company up in prior phase 2’s and (3) a longer treatment duration.
Stifel has a $142 price target. The consensus target is $134.46, and shares closed on Thursday at $120.23.
This has long been considered a buyout candidate and it has traded sideways since the summer. Vertex Pharmaceuticals Inc. (NASDAQ: VRTX) engages in discovering, developing, manufacturing and commercializing small molecule drugs for patients with serious diseases in specialty markets. The company focuses on developing and commercializing therapies for the treatment of cystic fibrosis and hepatitis C.
Wall Street as a whole has long been very positive on the stock, and some have indicated that the company could have as much as $10 in potential earnings-per-share power. Stifel analysts are very positive and noted this:
We recently hosted a tour of Vertex’s new San Diego research facility with a group of investors, during which we delved into the details of the company’s R&D engine with Dr. Paul Negulescu, SVP and Site Head of San Diego Research and Eric Rojas, Senior Director of IR. We left our meeting with affirmed conviction in the company’s very strong barriers to entry in Cystic Fibrosis, and optimism (though not captured in our model) that the CF approach can be leveraged onto other diseases. The new facility, open as of a few months ago, focuses 33% of its efforts on CF (the same magnitude of applied resources as previously), 33% on pain, and the other third of its bandwidth on other disease areas. The company reaffirmed that the journey in CF is not over, with research focused on potentially curative and/or single, more potent corrector (ie. two drug) regimens.
The $200 Stifel price target compares with a $196.52 consensus target. The shares closed Thursday at $180.52.
One smaller company has huge upside to the Stifel target, and the two older and more mature companies may represent safer bets for aggressive accounts looking to add biotech to portfolios.