Health and Healthcare

11 Biotech and Pharma Stocks With Huge Upside Targets for 2020

Jon C. Ogg

Published: January 7, 2020 2:58 pm

Last Updated: January 30, 2020 11:29 am

After a solid 2019 has seen mixed trading in 2020, and after a massive run over the last decade, many investors are still trying to decide where and how they want their assets positioned in their portfolio. Some investors grew worried that the fourth quarter’s strength may have eaten into potential upside in the stock market this year. That is a natural concern, and frankly should never be ignored. That said, the 28%-plus gain of 2019 in the S&P 500 would have only been a gain of more than 10% had the gain been tallied from late in 2018 before the worst fourth-quarter performance took the markets lower than they should have gone.

24/7 Wall St. tracks dozens of analyst calls each day of the week, and this turns into hundreds of analyst calls over the course of a week. Some analyst calls come with Buy ratings and the traditional Buy and Outperform ratings are generally seeing upside calls of 8% to 10% at this stage of the 10-year-plus bull market. One area of the market that can see much greater upside opportunities, which also implies a greater risk, is the biotech and emerging pharma stocks. Even some established Big Pharma and generic drug makers sometimes see outsized upside calls from Wall Street.

There have been many new and reiterated bullish analyst calls that have already been seen in 2020. That is also true of the biotech and pharmaceutical space. We have reviewed 11 standout biopharma analyst calls that have been made in the four trading days so far of the new year. Price targets are generally 12-month targets and each of these were given target prices which were either above consensus or were offering much larger implied gains than traditional analyst calls in that 8% to 10% range. Additional trading or call summary data have been provided on each.

There are always issues to consider with analyst calls, so please read our analyst guidance disclosure below before blindly using analyst calls as a basis for investing or trading.

Here are 11 biotech and pharma stocks that have been given big analyst upside targets for 2020.

Avid Bioservices Inc. (NASDAQ: CDMO) was reiterated as Buy with a $10.00 price target at Janney on January 6. The latest price was $6.95, implying 44% upside if its analysis is correct. Avid Bio has a mere $414 million market cap, but Janney was seeing an increased strategic value in 2020 as a pure-play monoclonal producer that is still a small-cap stock competing with larger companies at a time when the global capacity for biologics manufacturing remains constrained. The firm also sees an inflection point to faster growth and profitability coming in 2020.

Endo International PLC (NASDAQ: ENDP) was raised to Overweight from Neutral and its target price was raised to $7.00 from $5.00 at Piper Jaffray on January 3. Endo recently traded at $4.60, implying more than 52% upside if the firm is correct. Endo is a $1 billion market cap stock that recently launched a generic version of Afinitor tablets in the United States via its Par Pharma unit. The company’s news release from December indicated that the name brand dug saw approximately $412 million ins ales over the last four quarters.

IGM Biosciences Inc. (NASDAQ: IGMS), a $1 billion market cap company that is into research and development of engineered therapeutic engineered Immunoglobulin M (IgM) antibodies, was recently reiterated as Overweight at Piper Jaffray on January 6. What stood out here was that the $26.00 target price was raised all the way up to $53.00. That represents about 60% upside from the recent $32.95 share price. IGM Bio has a 52-week range of $16.10 to $57.42.

Illumina, Inc. (NASDAQ: ILMN), which is the leader in gene sequencing and genomics, was started as Buy with a $385 target price in a new sector call at Citigroup. Illumina recently traded at $329 for an implied upside of 17% if the Citigroup call is correct. This was one of the more bull targets in that sector call, and some of the peer companies were viewed as Hold/Neutral positions rather than with big buy ratings and big implied upside.

24/7 Wall St.
2020 Bull/Bear Outlook Sees the Dow Rising to 30,650 Before Year-End

Iveric Bio Inc. (NASDAQ: ISEE) was started with a Buy rating and a $13 price target (versus an $8.20 prior close) at Wedbush Securities on January 7. This was a $340 million market cap stock that has very little outside coverage. Wedbush sees the stock as undervalued as its lead asset Zimura is set to begin a pivotal clinical study in the first quarter of 2020 in the large geographic atrophy market with a $1 billion-plus estimated opportunity from a 1 million-plus current patient population.

Kodiak Sciences Inc. (NYSE: KOD) was given a new Buy rating and a $100 target price at Jefferies on January 3. This is a $3 billion market cap stock and the company aims to treat wet age-related macular degeneration and diabetic retinopathy. The most recent price of $67.75 would imply upside of over 47% if Jefferies is proven correct.

Mylan N.V. (NYSE: MYL) was reiterated as Outperform and the target price was raised to $27 from $25 at RBC Capital Markets on January 7. The new target is against a recent price of $21.15, which implied about 28% upside, and is now above-consensus rather than below consensus.

Mylan has suffered along with many other companies in generics and in drug pricing issues but a long-term chart showed that it had bottomed out close to $17 in mid-2019 and again last November after having lost two-thirds of its value in the prior few years. RBC’s take is that the worst is behind Mylan, but analysts around Wall Street have a wide array of opinions and many are still doubting the company.

Neovasc Inc. (NASDAQ: NVCN) is a tiny micro-cap outfit that recently closed on just a $10 million share offering to raise capital. On January 2, Canaccord Genuity raised its target price to $10.00 based on reducer expanding its medium-term revenue potential. Neovasc was most recently trading at $3.24 after a 7% drop from that share offering. That is still roughly 200% upside from the current price if this very aggressive target comes to fruition. It does have a 52-week range of $2.34 to $11.00, and it is a Canada-based company.

Pacira BioSciences, Inc. (NASDAQ: PCRX) was reiterated as Outperform along with an $85 target price at Wedbush Securities on January 7. This call would represent almost 100% implied upside if the call is proven correct in time from the current $42.85 share price. The driving force here is a recent study data showing that Exparel used in patients undergoing Cesarean section (C-section) for postoperative pain regimen — with the firm’s understanding that the opioid-free spinal anesthesia + Exparel TAP block arm achieved statistical significance against its target for the primary endpoint of reduction in postsurgical opioid consumption.

Pfizer Inc. (NYSE: PFE) was assigned a new Outperform rating and a $46 target price at RBC Capital Markets on January 7. That was against a prior $38.88 close, and it could help underline some of the catch-up potential this has in 2020 as Pfizer was a major underperformer and disappointment in 2019. If RBC is correct, that’s an implied 18.5% upside from the recent $38.80 share price — but that’s closer to a 22.5% implied upside for total return investors who would add in the 3.9% dividend yield.

X4 Pharmaceuticals Inc. (NASDAQ: XFOR) was started with a Buy rating and a $22 price target at H.C Wainwright on January 7. This is a small $130 million market cap stock and was trading at $10.45 with very thin trading volume. It was just at the very end of 2019 that the company announced its initiation of a Phase 1b clinical trial of mavorixafor in combination with ibrutinib (Imbruvica) for the treatment of Waldenström’s macroglobulinemia, which is a rare form of non-Hodgkin’s lymphoma.

24/7 Wall St. has tracked analyst calls for years, and there is one truth that all investors must heed when using analyst calls in their research: an analyst upgrade, downgrade, initiation or reiteration should never be used as a sole reason or sole source of information for the basis of deciding to buy, sell or hold. Some analysts have keen insight and deeper knowledge than others, but some analyst calls have effectively no better information than is available to any retail or institutional investor. Some analyst calls also end up being quite wrong, and in speculative biotech stocks that can mean that a huge potential upside call might turn into a loss of almost the entire investment. There are also many instances where brokerage firms employing analysts who cover the firms are also seeking to (or already are) have investment banking relationships with the same companies they follow.

As with all analyst calls and investment decisions, caveat emptor!