Biotechnology is a fickle industry for equity investors. These companies are notorious for their extraordinary overhead costs and their expensive operations. Until they hit their business jackpot and get approval for a new new drug, or a first-class treatment, or corner the market in treating a rare or terminal illness. When that happens, investors can see their positions rise by leaps and bounds. The winnings in the NASDAQ IBB demonstrate this possibility; this index of NASDAQ biotech stocks is up 33% over the past 52 weeks.
The fate of individual companies is of course not only linked to the results of research programs or the general fate of the sector. The political climate in which they operate can make or break their opportunities – and the biotech sector may have a good time in that. The high price of prescription drugs, a boon for pharmaceutical manufacturers, has become a political game, but the upcoming Democratic government will rely on a small legislative majority that is unlikely to support sweeping reforms.
"We believe the Washington DC environment will continue to be beneficial to the industry," said Mizuho analyst Vamil Divan. "Democratic control of the White House and both houses of Congress will likely keep the possible US drug price reform in the headlines, but we think the Biden administration will push for more incremental changes to our drug pricing system …"
Divan is optimistic about the short-term future of the pharmaceutical industry, citing the innovation of biotech companies large and small in addition to changing political trends. The trick here for investors is finding the biotech stocks that are ready for profit this year.
We used the Investing Insights platform to find one that fits a bullish profile: solid upside potential; a strong buying consensus rating; and a "Perfect 10" from the Smart Score. The Smart Score gives each stock a score from 1 to 8, based on a combination of 8 separate factors, each of which is known to correlate strongly with future performance.
Protagonist Therapeutics ( PTGX
Peptide technology, which focuses on the building blocks of proteins as a pathway to the treatment of disease, is a rapidly growing segment of the biotech sector. Protagonist Therapeutics (NASDAQ 🙂 uses a proprietary platform to develop new peptide-based drugs for the treatment of currently unmet medical needs.
The company's pipeline includes two distinct research programs, one for the treatment of blood disorders and one for the treatment of inflammatory bowel disease.
The blood disease track includes PTG-300, a new compound designed for subcutaneous injection. PTG-300 mimics the effects of hepcidin, a natural hormone that regulates iron balance and proper red blood cell development. The drug is being investigated as a treatment for polycythemia vera and for hereditary hemochromatosis, and has reached phase II trial
.
The inflammatory bowel disease (IBD) trail has four drug candidates, two in preclinical studies and two in phase II studies. The phase II study includes PTG-200, an IL-23R antagonist under investigation as a treatment for Crohn's disease. The company has also started dosing patients with PTG-235, another IL-23R antagonist, in a phase I study. PTG-235 is being developed under a collaboration agreement with Janssen Biotech.
These developmental paths have potentially large patient databases. There are an estimated 320,000 polycythemia vera patients in the US and Europe, and more than 1.6 million IBD patients in the US alone.
Piper Sandler analyst Yasmeen Rahimi is optimistic about Protagonist Therapeutics, writing, “Protagonist is well-equipped with a powerful discovery engine that uses its unique peptide-therapeutic discovery platform for indications where this drug modality has advantages over classical small molecule or biological / antibody approaches … With four separate clinical programs in two multi-billion dollar market opportunities (rare blood cancers and inflammatory bowel disease) and a promising platform that can develop additional candidates that will capture the attention of major Pharma (Janssen), we believe that PTGX is destined to grow into a multi-billion dollar company … "
Rahimi supports her optimistic stance with an Overweight (i.e. buy) rating for the stock and a $ 53 price target implying a 152% rise for the next 12 months.
As a result of the data and the gut response from Wall Street, PTGX receives a Strong Buy rating from analysts' consensus based on unanimous 4 Buy recommendations. The stock is selling for $ 20.21, and the $ 41.75 average price target implies a ~ 98% rise for the next year. (See PTGX Stock Analysis)
Collegium Pharmaceutical ( ]] COLL )
The next step is Collegium Pharmaceutical (NASDAQ :), a small drug company focused on the treatment of chronic pain. The company's products are designed to address the problems of abuse and addiction in the opioid market. With nearly 20 million Americans suffering from chronic pain problems, this Massachusetts-based company will not lack a patient base.
The Collegium product line includes two pain relievers: Xtampza, a 10 to 12 hour controlled release version of oxycodone, and Nucynta, an opioid with a similar effect to oxycodone, but with fewer reported side effects. As a controlled release formulation, Xtampza is less potent than morphine and may be less prone to abuse.
Collegium showed $ 79.2 million in revenues for 3Q20, reported the last quarter, with net profit of 32 cents a share. Both figures rose consecutively – the profit by 39%. Year-on-year earnings were more impressive: earnings per share rose from a loss of 18 cents in the same quarter a year ago, while sales grew 8.6% over the same period.
About Collegium of H.C. Wainwright, analyst Oren Livnat, sees the company occupying a solid position in its niche.
“[We’re] confidence in strong volume acceleration in early 2021. Then we hope Collegium can drive moderate but sustained volume growth year-round, while working to gain market share in the 22 million commercial lives in which Xtampza now has a parity position versus OxyContin … we see gross margin bolstered by Nucynta's improved profitability … We continue to view Collegium shares as extremely cheap with only 5.3x our 2021 EBITDA, ”wrote Livnat.
It is therefore not surprising why Livnat gives COLL an Outperform rating (i.e. buy). His $ 33 price target supports his upbeat stance and suggests a 50% rise over a year.
With 5 recent Buy ratings – and no reviewers posting negative comments – COLL shares have a unanimous Strong Buy analyst consensus. The average price target is $ 34.25, slightly more optimistic than Livnat's above, implying a 56% increase from the current trading price of $ 21.96. (See COLL Stock Analysis)
Olema Pharmaceuticals ( OLMA )
For a biopharma company that can find a niche and develop an effective drug to fill it, the rewards are significant. Olema Pharmaceuticals (NASDAQ 🙂 has focused on cancers related to estrogen and specific to women. The company's lead drug candidate is OP-1250, a complete estrogen receptor antagonist and selective estrogen degradator that has shown promise in early testing. OP-1250 is currently being evaluated prior to the initiation of Phase I trials in humans.
The company follows different paths with OP-1250. The drug candidate is considered a potential treatment for metastatic breast cancer, endometrial cancer and gynecological malignancies. Most of this research is still in the preclinical stages, but the Phase I study is in preparation for the treatment of estrogen receptor positive, HER2 negative, metastatic breast cancer.
Olema held its IPO in November 2020, as an attempt to raise capital for further investigation of OP-1250. The move into public markets was remarkably successful – the stock was initially priced at $ 19, but opened much higher, at $ 45, and closed at $ 49 on the first day of trading. The initial public offering raised over $ 240 million, and in In the following weeks, Olema has reached a total market capitalization of $ 1.69 billion.
One of the bulls is five-star analyst Arlinda Lee of Canaccord Genuity, who is not shy about her optimistic view of the company.
“Olema is developing powerful oral and complete ER signaling inactivators designed to elicit deeper and more durable responses than existing therapies … With clinical trials underway and paving the way for a rich data flow in 2021 and beyond, we are optimistic that Olema & # 39; s collective expertise in endocrine cancers and the differentiated properties of OP-1250 could translate into clinically meaningful benefits for patients and become a cornerstone of ER-directed cancer therapy, ”noted Lee.
In line with these optimistic comments, Lee places a Buy rating on OLMA, and her $ 60 price target indicates her confidence in upward growth of 43% for 2021.
Again we look at a stock with a unanimous Strong Buy consensus rating – there have been 4 buy-side reviews for Olema since its IPO. The stock is trading at $ 42 and the $ 60.67 average price target is consistent with Lee & # 39; s above. (See OLMA Stock Analysis)
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