Healthcare Business

Why 6 Top Biotech Stocks Could Beat Wall Street Q4 Estimates

Exelixis

This stock has bounced back nicely from the 2018 lows, and it still has solid upside potential. Exelixis Inc. (NASDAQ: EXEL) is focused on discovery, development and commercialization of new medicines to manage care and outcomes for people with cancer. Its cabozantinib product is an inhibitor of multiple tyrosine kinases, including MET, AXL and VEGF receptors.

The company’s Cabometyx tablets are approved for previously treated advanced kidney cancer, and Cometriq capsules are approved for progressive, metastatic medullary thyroid cancer. The third product, Cotellic, is a formulation of cobimetinib, a selective inhibitor of MEK is approved as part of a combination regimen to treat advanced melanoma. Both cabozantinib and cobimetinib have shown potential in a range of forms of cancer and are the subjects of broad clinical development programs.

SunTrust thinks the company can beat earnings estimates:

We expect cabozantinib revenues to be in line, to above consensus of $168.9 million — with growth driven by both the opening up of the 2L+ indication in kidney as IO moves front line, opportunities in frontline kidney, and expanded use in liver.

The $36 SunTrust price target compares with the $28.78 consensus target and the most recent close at $23.30.

Incyte

This top mid-cap is rumored to be in the sights of a larger biotech company. Incyte Corp. (NASDAQ: INCY) has a current validated approach in hematology-oncology, and there’s reason to believe the three wholly owned clinical-stage assets the company has could drive several billion in revenue, something important for an acquiring company looking to acquire assets. Many on Wall Street are bullish on the company’s rich pipeline of small molecule therapies in all stages of development, and they see the company as a key player in the cancer space.

Incyte focuses on the discovery, development and commercialization of proprietary therapeutics in oncology. It offers Jakafi for the treatment of myelofibrosis and polycythemia vera cancers. The company’s commercial products also include baricitinib for rheumatoid arthritis, which was approved in early June by the FDA.

The SunTrust analysts are positive on Jakafi sales and noted this.

We expect Jakafi sales for fourth to be above consensus — but within upper range of fiscal year 2018 guidance. We expect few surprises from the updates at the beginning of the year. We expect the focus of the fourth quarter earnings call to be on (1) 2019 Jakafi guidance — which is typically below the street but usually finishes above the street, and (2) reiteration of the 2019 data timelines from the start of the year.

SunTrust has a price target of $80, but the consensus target is up at $85.63. The stock closed most recently at $79.98 a share.

Spark Therapeutics

Takeover rumors have swirled around this company for years as well. Spark Therapeutics Inc. (NASDAQ: ONCE) engages in the research, development and commercialization of gene therapies. Its product portfolio intends to treat inherited retinal sickness, liver-mediated and neurodegenerative diseases.

With both FDA and European approval for Luxturna for patients with inherited retinal disease. SunTrust is positive on the growth potential and said this:

Spark noted that the company shipped 75 vials of Luxturna in 2018, which indicates the shipment in int e fourth quarter of 2018 was 33, representing a 38% growth in volume as compared to 3Q18. We expect volume growth to slow down in the U.S. and pick up gradually in Europe. Luxturna was approved by the European Commission in November 2018 and Novartis will market the drug in 28 member states of the EU, as well as Iceland, Liechtenstein, and Norway. Spark is eligible to receive up to $25 million in cash milestones payments based on regulatory approval in Europe and an additional $40 million initial sales outside the U.S. The company is also entitled to receive royalty payments (in mid-20% range) on net sales of Luxturna outside the U.S.

SunTrust has set a $61 price target. The consensus target is $60.75. Shares were last seen trading at $45.96, up well over 7% on the day.

Almost all these top companies will be reporting fourth-quarter results in early to middle of February. It is important to remember that biotechnology stocks can be very volatile, and while the analysts use the best possible data in forming estimates, delays in sales or clinical results that fail to meet major endpoints can have a serious effect on share prices.

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