Health care is still going strong in April, and biotech and emerging pharmaceutical stocks still have huge gains so far in 2015. La Jolla Pharmaceutical Co. (NASDAQ: LJPC) has seen its shares jump on this wave with an analyst call that implies a potential double for investors. Oppenheimer’s Ling Wang weighed in on La Jolla and initiated coverage with an Outperform rating and a price target of $43, implying an upside of around 98% from the current price.

La Jolla has an attractive pipeline addressing multiple, large unmet medical needs. Oppenheimer sees the lead compound of LJPC-501 as having a strong probability of success (65%) in a pivotal Phase 3 trial in catecholamine-resistant hypotension (CRH).

The firm also expects the second compound, GCS-100, to establish definitive proof-of-concept in a Phase 2b trial in diabetic chronic kidney disease (CKD) by the second half of 2016. Other value drivers for La Jolla include potential proof-of-concept of LJPC-501 in hepatorenal syndrome (HRS) and advancement of earlier stage pipeline products.

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A few other key points from the report:

• LJPC-501 has a good chance of Phase 3 success. The firm’s confidence in Phase 3 success in CRH is based on efficacy observed in a preclinical hypotension model and positive proof-of-concept from a randomized pilot trial. The FDA-agreed primary endpoint (blood pressure) ensures a fast pathway to approval (projected in 2017).
• LJPC-501 is also evaluated in an ongoing Phase 2 trial in HRS, a significant unmet medical need with very poor prognosis. Sign of activity (reversal of HRS) seen in one treated patient in Phase 1 was encouraging.
• GCS-100 addresses a large market in diabetic CKD. Oppenheimer believes that CGS-100 established a preliminary proof-of-concept in Phase 2 a CKD trial. With a longer treatment duration and more homogeneous patient population, they expect GCS-100 to establish a definitive proof-of-concept in diabetic CKD in the ongoing Phase 2b trial in the second half of 2016.
• As for the rest of the pipeline, LJPC-1010, an oral form of galectin-3 inhibitor, and LJPC-401, a formulation of hepcidin, are expected to enter Phase 1 trials in 2015. Both programs address large markets (NASH, early-stage kidney disease and iron overload) and potentially create significant shareholder value.

In Oppenheimer’s report, Wang said:

We use a sum-of-the parts analysis to value LJPC shares. Our 12- to 18-month target price of $43 is derived by summing the following components: the estimated risk-adjusted NPV (rNPV) of LJPC-501 in CRH at ~$322M (~$21/share), in HRS at $104M ($7/share), and GCS-100 in diabetic CKD at ~$229M (~$15/share). We apply a 5x revenue multiple (a typical multiple for novel drugs) to estimated peak sales to derive the rNPV. We have not factored in the preclinical pipeline in the current valuation. We project peak sales of ~$581M for LJPC-501 in CRH, $456M in HRS, and ~$1B for GCS-100 in diabetic CKD and probability of success (of reaching the market) of 65%, 35% and 45%, respectively.

Shares of La Jolla were up 16% at $22.20 Tuesday morning, in a 52-week trading range of $6.17 to $24.89. The stock has a consensus analyst price target of $36.20.

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