2 Analyst Biotech Stock Calls With Over 100% Upside Potential

[cnxvideo id=”655413″ placement=”ros”]Long-time aggressive investors know that biotechnology stocks can offer huge upside or also get absolutely hammered, and in some cases go out of business. Needless to say the biotech world has had a very difficult year. Even the biggest and the best companies, many of which trade cheaper than big pharmaceutical companies, have suffered as investors have fled the sector.

Much of the blame for the poor showing is the very shrill rhetoric from politicians in an election year over drug pricing, and while there is always an argument for lower prices, taking down an entire sector is extreme.

In separate new reports, the analysts at Wedbush focus in on two companies that not only have data that could prove to be huge, but shares of each have been absolutely hammered over the past year, offering aggressive accounts the best entry points in some time. These stocks are very speculative, and though rated Buy, they are only appropriate for very aggressive portfolios.

Novavax

This small biotech has taken investors on a roller-coaster ride over the past two years but could be ready for a big move higher. Novavax Inc. (NASDAQ: NVAX) is a clinical-stage vaccine company committed to delivering novel products to prevent a broad range of infectious diseases. Its recombinant nanoparticles and Matrix-M adjuvant technology are the foundation for ground-breaking innovation that improves global health through safe and effective vaccines.

Since 2011, Novavax has been developing influenza vaccines as part of a project that has been funded under contract with the U.S. Department of Health and Human Services, Biomedical Advanced Research and Development Authority (BARDA). The agency’s scope has been to develop seasonal and pandemic influenza vaccine candidates, based on Novavax’s proprietary virus-like particle (VLP) technology.

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The Wedbush team notes that at recent keystone symposia in Cape Town, South Africa, Novavax introduced data for a nanoparticle flu vaccine. In the past, Novavax has used VLPs for flu and nanoparticles for respiratory syncytial virus (RSV) and Ebola. Using lessons learned from the development of RSV and Ebola nanoparticle vaccines, Novavax has identified several advantages, representing an evolution in vaccinology that have guided the company’s strategic approach:

1. Influenza nanoparticles are engineered to display conserved antigenic regions, which elicit broadly neutralizing antibodies.
2. Improved manufacturing yields.
3. Use of Matrix M adjuvant, shown to be well-tolerated and highly effective at stimulating enhanced immunity.

In the research report, the Wedbush analyst notes:

The company is testing its RSV vaccine in adults 60 years of age and older. The primary endpoint is a decrease in moderate to severe RSV, defined by RSV positive with at least three lower respiratory tract symptoms including cough, sputum production, wheezing and dyspnea; in the Phase II study, vaccinated individuals experienced 64% less moderate to severe RSV. We believe the previous data de-risk the Phase III study and believe there is a high probability of success for the trial; we recommend shares ahead of pivotal data.

The Wedbush price target on the stock is a gigantic $14, and the Thomson/First Call consensus target is even higher at $14.21. The shares closed Friday at $6.12.

Relypsa

This biopharmaceutical company also has been hammered and has big upside potential, according to the Wedbush analyst. Relypsa Inc. (NASDAQ: RLYP) is focused on the discovery, development and commercialization of polymeric medicines for patients with conditions that are often overlooked and undertreated and can be addressed in the gastrointestinal tract.

The company’s first medicine, Veltassa (patiromer) for oral suspension, was developed based on Relypsa’s rich legacy in polymer science. Veltassa is approved in the United States for the treatment of hyperkalemia. Veltassa has intellectual property protection until 2030 in the United States and 2029 in the European Union.

In a huge win for the company, and a big surprise for many, AstraZeneca’s competing drug to Veltassa, ZS-9, which many thought would gain approval but have a severe black box warning, was not approved by the FDA. This incredible and unexpected setback is fantastic news for Relypsa. With AstraZeneca out of the game for now, Relypsa has the commercial market with estimated peak sales forecasts of about $1 billion all to itself.

Relypsa also announced recently that the company has submitted a supplemental New Drug Application (sNDA) to the U.S. Food and Drug Administration (FDA) requesting label changes for Veltassa for oral suspension based on results of 12 Phase 1 drug-drug interaction studies in healthy volunteers.

The $51 Wedbush price target for the stock is well above the consensus estimate of $32. The stock closed Friday at $19.96.

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Two big opportunities for aggressive investors. There are also substantial risks should the outcomes not play out favorably. With that in mind, some smaller speculative positions could be the right play for aggressive risk tolerant accounts.