The more disruptive the market is, the more we look for companies that are not affected by the daily sturm and drang of the news cycle because they have supply chain issues in China. The incredible volatility pushed into the market by algorithmic trading and the machines spewing in fast-money orders has made it difficult for investors to find solid stock ideas with big upside potential.
One sector that has avoided much of the current turmoil is health care, and especially the biotech companies. A new Baird research report has the firm’s top recommendations for the rest of 2019 and 2020. We found four top stocks there, all rated Outperform, with gigantic implied upside to the Baird price objective.
A recent big pullback in these shares could be offering investors a great entry point. Align Technology Inc. (NASDAQ: ALGN) designs, manufactures and markets a system of clear aligner therapy, intra-oral scanners and computer-aided design and computer-aided manufacturing (CAD/CAM) digital services for use in dentistry, orthodontics and dental records storage in the United States and internationally.
The company’s Clear Aligner segment offers Invisalign Full, a treatment used for a range of malocclusion. Its Invisalign Teen treatment addresses orthodontic needs of teenage patients, such as compliance indicators, compensation for tooth eruption and six free single arch replacement aligners. And its Invisalign Assist treatment is for anterior alignment and aesthetically oriented cases.
The Baird price target is a stunning $259, but the Wall Street consensus target even higher: $263. The stock closed trading Monday at $175.19.
This off-the-radar company also has some big upside potential. Iovance Biotherapeutics Inc. (NASDAQ: IOVA) is a clinical-stage biopharmaceutical company focused on the development and commercialization of cancer immunotherapy products designed to harness the power of a patient’s own immune system to eradicate cancer cells. Its lead program is an adoptive cell therapy utilizing tumor-infiltrating lymphocytes, which are T cells derived from patients’ tumors, for the treatment of metastatic melanoma.
Iovance’s lead product candidate, LN-144 for metastatic melanoma, is an autologous adoptive cell therapy utilizing tumor-infiltrating lymphocytes. The company is developing LN-145 to treat cervical and head and neck cancers. Regulatory submission for LN-145 in advanced cervical cancer is expected in the second half of 2020.
Baird has a huge $56 price target, while the consensus target is just $34.13. The shares were last seen trading at $20.23 apiece.
This is a favorite mid-cap biotech pick at Baird for the rest of 2019. Sarepta Therapeutics Inc. (NASDAQ: SRPT) focuses on the discovery and development of RNA-based therapeutics for the treatment of rare, infectious and other diseases. Its lead product candidate is eteplirsen, an antisense phosphorodiamidate morpholino oligomer therapeutic that is used for the treatment of individuals with Duchenne muscular dystrophy (DMD), a genetic muscle-wasting disease caused by the absence of dystrophin.
The stock popped recently when Pfizer announced data on its gene therapy for DMD that appeared to be inferior to results on Sarepta’s own offering. Then last week it was hit hard when the company received a complete response letter from the FDA with a delay for its application for Golodirsen to treat a subset of DMD patients. The delay surprised the company and Wall Street, given advanced label discussions had occurred. While most analysts adjusted launch assumptions, they agree the biggest driver of value is from the DMD gene therapy program.
There is currently no available cure for DMD, one of the most common genetic diseases in the world. The gene therapies, if they live up to their promise, could allow patients born with the disease to live normal lives.
The gigantic $181 Baird price objective compares to the $194.33 consensus target. Shares closed at $93.23 on Monday.
This is a top biotech play for aggressive accounts to consider. Regeneron Pharmaceuticals Inc. (NASDAQ: REGN) is a biopharmaceutical company focused on the development of therapeutic human antibodies for the treatment of eye disorders, hypercholesterolemia, cancer, inflammation and other diseases.
Regeneron’s product sales are driven principally by its VEGF inhibitor Eylea, which is approved for use in wet age-related macular degeneration and diabetic macular edema, and by Praluent for the treatment of hypercholesterolemia.
The company recently announced positive pivotal Phase 3 results for evinacumab, an investigational angiopoietin-like 3 antibody, in patients with homozygous familial hypercholesterolemia. These patients have severely elevated levels of bad cholesterol (otherwise known as low-density lipoprotein, or LDL, cholesterol), and often experience early atherosclerotic disease, sometimes suffering cardiac events as early as their teenage years.
Baird has set its price target at a whopping $410. The consensus target is $389.16, and shares closed Monday at $284.73.
While not really concerned with trade issues with China, these companies are very volatile, and only suitable for accounts with a very high risk tolerance. With that said, a big winner with one of these top stocks could mean some big return on capital.