Biotech stocks require only a few select indicators to send a share price soaring, or conversely, to cause it to tumble mercilessly down the charts. An FDA decision or results from a clinical trial have the ability to impact the stock’s direction either way, often dramatically so.
On the Street, though, the key is to see beyond the noise and recognize the inherent future potential a company presents. Ignore the price for the moment and concentrate on value, is an oft repeated mantra. Is the company on its way to solving previously solution-free problems? Is it cash strapped or financially secure? Does it have further catalysts down the line? All of these are issues that need to be considered when investing in a stock, and certainly in the volatile world of biotechs.
Using TipRanks’ Stock Screener, we were able to zero in on 3 promising tickers in the biotech sector which the analysts think are ready to gain value in 2020. All three present serious upside potential, and what’s more, all currently boast a “Strong Buy” consensus rating from the Street. Let’s read the data.
If you’re going to take your time to get something right, then you might as well really take your time. After almost 40 years of failed attempts and languishing in a perpetual development stage, Immunomedics might finally be on its way to getting a treatment to market.
This biotech develops monoclonal antibody-based products for the treatment of cancer. The aforementioned almost-ready-to-launch drug is sacituzumab govitecan, a treatment for metastatic triple-negative breast cancer (TNBC), which combines a cancer-targeting antibody with an antitumor drug. The treatment is to be used as a “final attempt” drug following the failure of two previous therapies.
Immunomedics was handed the dreaded CRL (complete response letter) from the FDA following its application last year after concerns not specifically related to the drug, but to “chemistry, manufacturing, and control” issues at the company’s manufacturing plant were raised. The concerns were addressed by IMMU and an application was resubmitted last month.
Hopes are high as results from the drug’s clinical trials were better than those exhibited for chemotherapy treatments in second-line settings; Sacituzumab exhibited a 33% success rate in the third-line setting and progression free survival was 5.5 months. Chemo regime rates are in the mid-teens in both cases. The drug is also being studied as a potential early line treatment, too, and if it gets approval this year, expect Immunomedics’ share price to soar in 2020.
H.C. Wainwright’s Ram Selvaraju is bullish on the cancer fighter. The 5-star analyst said, “We continue to believe that sacituzumab should potentially reach the market in early 3Q20 given the following: (1) the FDA previously reviewed sacituzumab’s efficacy and safety profile and Immunomedics had a product label in hand, while the approval was solely subject to chemistry, manufacturing, and controls (CMC) review; (2) the issue cited in the Complete Response Letter (CRL) received in January 2019 was specifically CMC-related; (3) sacituzumab’s clinically meaningful incremental efficacy benefit in third-line mTNBC relative to well-established historical controls; and (4) Immunomedics has had extensive dialog with FDA reviewers prior to the previous BLA submission, during the review and after the CRL.”
Selvaraju, therefore, maintained his Buy rating on IMMU. The analyst’s confidence is reflected by a raise of his price target: from $26 to $31, as it happens. The new target implies potential upside of 63%.
The Street appears equally confident in IMMU’s future potential; 4 Buy ratings add up to a Strong Buy consensus rating. With an average price target of $28, the analysts believe Immunomedics can add 47% to its share price over the coming year.
Revance Therapeutics (RVNC)
After a disappointing 2019, which saw Revance’s share price drop by more than 18%, the neuromodulator-focused biotech has started 2020 with a bang; Revance stock is up by 38% year-to-date.
So, what’s all the fuss about, then? The biotech recently secured a licensing deal with Swiss company, Teoxane Laboratories, for the exclusive US rights to its platform of hyaluronic-acid dermal fillers. These include the FDA-approved RHA 2, RHA 3, and RHA 4. Revance will issue 2.5 million shares to Teoxane in exchange for the rights. Additionally, the company also received the rights to RHA 1, a fourth filler currently in clinical trials, with data expected in 2021.
There’s more to come in 2020, too. Revance recently filed a Biologics License Application (BLA) for DAXI, a long-lasting formulation of a neurotoxin treatment of moderate to severe glabellar (frown) lines. Revance expects an FDA approval for the treatment in 2H20, following which DAXI could potentially provide serious competition to a market dominated by Allergan’s Botox.
Needham’s Serge Belanger believes RVNC’s product line has the potential to take a big chunk out of the $5 billion neuromodulator market. The 4-star analyst said, “We view RVNC’s DaxibotulinumtoxinA (Daxi), which has consistently demonstrated higher efficacy and longer duration than any of the current neuromodulators, as the first major neurotoxin innovation in the last 30 years. The recent BLA filing of Daxi in late November kicked off what should be a transformational period for RVNC in 2020 that include a potential Mylan opt-in for a biosimilar collaboration, numerous data readouts, most notably the pivotal Phase 3 cervical dystonia (CD) trial readout that will establish the product’s therapeutic potential, and a likely first FDA approval and launch in 2H20.”
Where does this leave Belanger, then? In the Buy section, naturally. Along with the reiteration, Belanger kept his price target at $32. This implies potential gains of 42% over the next 12 months. (To watch Belanger’s track record, click here)
The frown warrior gets no frowns from the Street, either. 8 Buys spell out a unanimous Strong Buy consensus rating for Revance. With an average price target of $32.88, the upside potential comes in at 46%.
Theravance Biopharma (TBPH)
Theravance Biopharma has a diversified portfolio focusing on therapies in a number of areas; these include respiratory, gastrointestinal, cardiovascular, infectious, inflammatory, and immunology diseases. Although the company has hit its targets over the last couple of years, the stock’s performance has not followed accordingly. Is this about to change in 2020?
Theravance already has an FDA approved drug on the market. Yupelri, a treatment for chronic obstructive pulmonary disease (COPD) that came as the result of a partnership with Mylan, gained approval from the FDA at the end of 2018. According to Theravance, throughout the first three quarters of 2019, roughly 21,000 patients received the drug.
The company also has additional revenue streams. GlaxoSmithKline provides a royalty of between 5.5% to 8.5% for global net sales of Trelegy Ellipta. The COPD treatment is approved in 38 countries and has snapped up a 31% market share since September 2017. Theravance also sold its drug for life-threatening bacterial infections, Vibativ, to Cumberland Pharmaceuticals. The deal included a $20 million upfront payment plus royalties of up to 20% of U.S. net sales (capped at $100 million).
With further drug candidates in the pipeline, Cantor Fitzgerald’s Louise Chen believes Theravance is “undervalued and underappreciated.” Highlighting the commercial launches of Trelegy Ellipta and Yupelri, its success in executing its business objectives in 2019, and the company’s “best-in-class” pipeline, the analyst thinks TBPH has “strong momentum” heading into 2020.
Accordingly, then, Chen reiterated an Overweight rating on TBPH and kept her price target of $55 as is. Should the target be met, investors will be taking home a very healthy 118% increase over the coming months. (To watch Chen’s track record, click here)
Currently, Theravance has a Strong Buy consensus rating from the Street. The breakdown presents 5 Buys and 1 Hold rating. At $36.67, the average price target presents possible upside of 45%.