May looked as though it was ignoring the “Sell in May and go away!” mantra. Biotech investors also had to absorb many political jabs over drug pricing, as well as concern over valuations reaching epic levels the prior year. It is without argument that many of the would-be future drug companies in biotech and other aspects of biohealth might have cures for unmet needs or have new treatments not yet on the market. That means that the government is unlikely to be a factor for many of the companies, unless they start coming out with a max-margin mandate.

Investors have to understand that the biotech and biohealth industry is perhaps the most speculative of them all. The losses can be absolute, but the reward can be exponential if the right companies are picked. Creating new drugs for cancer, heart disease, inflammation, autoimmune issues and diabetes is no simple task. That means many investors want or need help in identifying which companies in biotech and biohealth may be the big winners — or which may be the big losers.

24/7 Wall St. tracks many analyst upgrades and downgrades each day, and this turns out to be hundreds each week. Many biotech and biohealth stocks end up standing out above the rest of the pack because they often come with upside price targets that sound too good to be true.

When analysts issue upside calls for Dow and S&P 500 stocks, they generally target upside of 8% to 15% with most Buy and Outperform ratings. If the projected upside is 40%, 75% or even well over 100%, investors just have to automatically assume the risk is massively higher than they might expect elsewhere.

In some ways, speculative biotech investors are just gambling, and their bets may be on layers of assumptions that may take five years or longer before the outcome is even known. Many revenue and upside price targets in biotech are also not the traditional one-year target prices. These assumptions might be focusing on revenue outlooks for 2020 or even beyond.

The final warning here is that some of these speculative biotech and biohealth stocks could implode and disappear. These are serious risks. Others may operate in a zombie mode for years and years, often valued lower than their balance sheets might suggest.

Now that the warnings have been made, here are seven speculative biotech and biohealth players in which analyst calls during the week ending May 27 have given major upside projections. And for a reference, here were the 10 speculative biotech and biohealth picks featured for the week ending May 20.

GW Pharmaceuticals

GW Pharmaceuticals PLC (NASDAQ: GWPH) is believed to be the closest cannabinoid player to U.S. drug approval. It had international sales of $43 million last year, and it is still a ways off before Thomson/First Call sees U.S. revenues. Don’t tell that to Merrill Lynch, after the firm reiterated its Buy rating and $165 price objective this past week. The prior close was $87.95, and shares were up at $90.48 on Friday’s close.

Merrill Lynch talked about Phase 3 trial of Epidiolex for Lennox-Gastaut syndrome, as well as the NDA filing and commercialization. If the team is right, this could be some 83% more in upside. GW Pharma’s 52-week high is up at $133.98, and the consensus analyst price target is almost $148.
Integra LifeSciences

On May 23, Integra LifeSciences Holdings Corp. (NASDAQ: IART) was reiterated as Buy at Argus, and the firm raised its price target to $90 from $80. This initially put Integra’s shares at a 52-week high of $74.49, but the stock was at $73.89 at the end of the week. Argus showed that a premium valuation here is warranted, based on Integra’s strong sales growth, steady flow of new products and rising margins. This represents upside of almost 25% for the $2.7 billion company.

Minerva Neurosciences

One the week’s monster stock moves was seen in Minerva Neurosciences Inc. (NASDAQ: NERV). The share price rose over 200% on May 26, after the release of Phase 2a drug study data for major depressive disorder and Phase 2b for schizophrenia. Its shares rose from $3.54 to as high as $13.22 before setting in at $11.80 at Thursday’s close.

JMP Securities already had a Buy rating and a $10 target ahead of the news (as did Jefferies), but JMP raised its target to $17 afterward. If JMP is right, that implied another 44% upside from Thursday’s close. On Friday, Jefferies also raised its target price up to $17. This was covered more in-depth, and the calls here might keep investors more interested. The market cap was over $310 million on Friday.

Neurocrine Biosciences

Jefferies reiterated its Buy rating on Neurocrine Biosciences Inc. (NASDAQ: NBIX) on May 23, but the price target was raised to $61 from $58. This compares to a $47.89 prior close, but the share price was at $46.19 at the end of the week. The firm said its survey suggests sizable TD market and valbenazine adoption. If Jefferies is right, this implies upside of almost 33%. The company has a market value of nearly $4 billion, and its 52-week trading range is $31.25 to $58.46.

Teladoc

Teladoc Inc. (NYSE: TDOC) is the only pure-play public tele-health provider. That means it is neither a biotech nor a pharma stock, but it is a leader in its field and it aims to drive down health care costs handily through time. Teladoc was initiated with an Overweight rating and was assigned a $20 price target at Piper Jaffray on May 26. Even after closing up 5.5% at $10.84 after this call, that left an implied 90% or so upside, if the firm is right.

What’s more here is that Teladoc came public in 2015 and its old high is $35.42. The Piper Jaffray target is not even the highest analyst target at all. Teladoc received a second call on Friday, May 27, in which it was reiterated as Outperform with a $25 price target at Oppenheimer. The firm blamed the stock’s underperformance on a liquidation event caused by the sector exit by one of the VC investors in Teladoc. Oppenheimer noted that management’s confidence in 2016 and 2017 earnings and the visibility and a strong pipeline and selling season gives it confidence. Teladoc closed trading at $11.34 on Friday.

TG Therapeutics

When SunTrust Robinson Humphrey started TG Therapeutics Inc. (NASDAQ: TGTX) with a Buy rating on May 27, the firm also assigned an $18 target price on the shares. The company released news that it has entered into a global collaboration to develop and commercialize novel BET inhibitors from Jubilant Biosys for the treatment of hematological malignancies. The SunTrust $18 target compares to a $7.22 prior close, but the stock closed up more than 7% at $7.74 on Friday.

Asterias Biotherapeutics

On Monday, May 23, Asterias Biotherapeutics Inc. (NYSEMKT: AST) was started with a Buy rating at Chardan Capital. The firm also assigned a $5.50 price target. This was given attention, because on Monday the stock was up 8% at $3.38, after a $3.13 prior close. Asterias also saw its stock rise another 5% $3.52 on Tuesday. By Thursday’s close the stock was still at $3.34, implying upside 65%. Asterias also has an even higher price target, and the $150 million outfit targeting spinal cord injury, has a 52-week range of $2.36 to $12.22.

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Innocoll

Not only is it thin in volume, but Innocoll Holdings PLC (NASDAQ: INNL) had a $263 million market cap as of Thursday. The stock was reiterated as Buy at Janney on May 25, but the fair value estimate here was raised to $18 from $15. This implied over 100% upside from the $8.45 price at that time, although Innocoll was up to $10.80 by Thursday after positive Phase 3 data on postoperative pain relief.

The analyst call was made after Xaracoll Phase 3s showed statistically significant post-operative pain relief, and that it was associated with significant delay in time to first use of opioids and total opioid use. Again, note that Innocoll is very thinly traded and its bid-ask is wide.

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