Health and Healthcare

Jefferies Out With 5 Biotech Stocks Under $10 With Gigantic Upside Potential

Lee Jackson

Published: October 20, 2018 9:20 am

Last Updated: January 11, 2020 4:07 pm

While most of Wall Street focuses on large and mega-cap stocks, as they provide a degree of safety and liquidity, many investors are limited in the number of shares they can buy. In fact, many of the biggest public companies, especially the technology giants, trade in the low to mid hundreds, all the way up to over $1,000 per share. At those steep prices, it’s pretty hard to get any decent share count leverage.

Many investors, especially more aggressive traders, look at lower-priced stocks as a way to not only make some good money but to get a higher share count. That can really help the decision-making process, especially when you are on to a winner, as you can always sell half and keep half.

We screened our 24/7 Wall St. research database and found five biotech stocks that are rated Buy by Jefferies analysts, are trading under the $10 level and could provide investors with some solid upside potential. While much better suited for very aggressive accounts, they could prove exciting additions to portfolios looking for solid alpha potential.

Ardelyx

This micro cap biotech play could be a big winner for ultra-aggressive accounts. Ardelyx Inc. (NASDAQ: ARDX) focuses on addressing cardiorenal and gastrointestinal diseases. It operates through the research, development and commercialization of its biopharmaceutical products segment. The company’s products line includes cardiorenal and gastrointestinal portfolios.

The Ardelyx cardiorenal portfolio includes two Phase 3 clinical product candidates. Tenapanor is in Phase 3 clinical development for treating hyperphosphatemia in end-stage renal disease patients on dialysis. RDX7675 is in Phase 3 clinical development for treating hyperkalemia in chronic kidney disease and heart failure patients. This portfolio also includes RDX013 and RDX011. The gastrointestinal portfolio is led by tenapanor for the treatment of irritable bowel syndrome with constipation. This portfolio also includes RDX8940, RDX011 and RDX023.

The Jefferies price target for the shares is $7, which compares with the much higher Wall Street consensus target of $11.83. The stock closed trading on Friday at $3.89 a share.

BioCryst Pharmaceuticals

This company has been hitting screens as a potential takeout target. BioCryst Pharmaceuticals Inc. (NASDAQ: BCRX) designs, optimizes and develops novel small molecule drugs that block key enzymes involved in rare diseases. The company currently has one approved product: Rapivab (for influenza) and two pipeline products: BCX7353 (for hereditary angioedema) and BCX4430 (an antiviral).

Last month the company announced that the National Institute of Allergy and Infectious Diseases (NIAID), part of the National Institutes of Health, had awarded BioCryst an additional $3.5 million to support clinical trials of galidesivir in patients with yellow fever. Yellow fever represents a significant unmet medical need and a new potential use of galidesivir. With this additional $3.5 million contract amendment, the NIAID development contract for galidesivir now totals $43.0 million.

Jefferies has a price target of $8.50 for the stock, but the posted consensus target is $10.25. The shares closed at $7.16 on Friday.

Epizyme

This is another biotech company that has been seen as a takeover candidate. Epizyme Inc. (NASDAQ: EPZM) discovers, develops and plans to commercialize epigenetic therapies for cancer patients. The company develops small molecule inhibitors of other chromatin-modifying proteins.

Epizyme’s lead product candidate, tazemetostat, is a potent and selective inhibitor of the enhancer of zeste homolog 2 histone methyltransferases, an enzyme that plays an important role in various cancers. The company is evaluating tazemetostat in a Phase 2 study in adults with relapsed or refractory non-Hodgkin lymphoma, and one Phase 1 study in children with molecularly defined solid tumors. The company owns the global development and commercialization rights to tazemetostat outside of Japan.

Here, the stunning $22 Jefferies price target is in the same neighborhood as the $22.11 consensus target. The stock ended the week at $8.76 per share.

Immunogen

This is another aggressive play for accounts looking for a big winner. Immunogen Inc. (NASDAQ: IMGN) develops targeted cancer therapeutics using its antibody-drug conjugate (ADC) technology. An ADC with the company’s technology comprises an antibody that binds to a target found on tumor cells conjugated to one of its anti-cancer agents as a payload to kill the tumor cell once the ADC has bound to its target.

Immunogen’s product candidates include mirvetuximab soravtansine, IMGN779, IMGN632 and coltuximab ravtansine. Its portfolio is led by mirvetuximab soravtansine, a first-in-class ADC targeting folate-receptor alpha that is in a Phase 3 registrational trial called FORWARD I. Its FORWARD II trial consists of cohorts assessing mirvetuximab soravtansine in combination with Avastin (bevacizumab), Keytruda (pembrolizumab) and carboplatin.

The company also has developed tubulin-acting maytansinoid payload agents, which include DM1 and DM4, as well as deoxyribonucleic acid (DNA)-alkylating agents called IGNs.

Jefferies has set its Immunogen price target at $15. The posted consensus was last seen at $15.13, and the shares closed on Friday at $7.43 apiece.

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Rigel Pharmaceuticals

The Jefferies team has covered this company for years, and the low price makes it an attractive target. Rigel Pharmaceuticals Inc. (NASDAQ: RIGL) is engaged in the discovering, developing and providing novel small molecule drugs that improve the lives of patients with immune and hematological disorders, cancer and rare diseases.

The company’s pioneering research focuses on signaling pathways that are critical to disease mechanisms. Its clinical programs include clinical trials of fostamatinib, an oral spleen tyrosine kinase inhibitor, in a number of indications.

Jefferies has a price target of $7. The consensus target is set at $8.14, and the shares closed at $2.98 on Friday.

These five super-aggressive biotech stocks are all rated Buy at Jefferies. It should be noted that these stocks are only suitable for accounts that have high risk tolerance. While their prices are low, the risk could be very high if clinical trial goals are not met.