Health and Healthcare

4 Speculative Biotech and Biohealth Analysts Calls for Huge Upside

Jon C. Ogg

Published: July 17, 2016 10:35 am

Last Updated: January 13, 2020 5:38 am

The week of July 15 may have ended on a soft note, but the week was more importantly a one that brought new highs in the Dow Jones Industrial Average and the S&P 500. Investors reportedly have been lightening up on equity positions into the rallies. Still, every pullback has been bought with aggression, and investors are looking for ways to make money outside of many traditional stocks.

One industry that is known for making fortunes is the biotechnology, and sometimes the analysts covering it (and its peripheral areas in biohealth) issue upside price targets of 30%, 50% or even over 100%.

24/7 Wall St. reviews dozens of analyst research reports each days of the week, which ends up being hundreds of analyst calls throughout the week. Of those analyst stocks with Buy and Outperform ratings, some are in the biotech and biohealth space.

Investors in the biotech and biohealth space generally are taking on much more risk than in the likes of most Dow and S&P 500 stocks. That means they will demand more potential upside for that risk. After all, there is often a viability risk on top of just drug price risks and regulation or oversight risks. Many biotechs fail to meet their drug study targets, and some of them ultimately implode and disappear entirely. As with other analyst calls, investors need to consider that there is no such thing as a free lunch on Wall Street. Sometimes these companies go into zombie mode with no real developments for years (or ever again).

Keep in mind that 24/7 Wall St. this week just had another look at the major biotech companies with lucrative drug candidate pipelines that were valued at close to zero.

Here are three speculative biotech and biohealth stocks under $10 in which analysts gave huge upside calls during the week of July 15. 24/7 Wall St. has tried to offer some offsetting remarks or show risks about each company. It just wouldn’t be fair to show only the upside. After all, we have to again remind readers that small cap and speculative biotechs often vanish after disappointments.

Celsion

H.C. Wainwright started Celsion Corp. (NASDAQ: CLSN) with a Buy rating on July 12. The firm initiated coverage with a price target of $3, which was over 100% higher than the prior day’s $1.30 closing price. This analyst call seems to have gone largely unnoticed as the shares were trading at $1.25 late in the week.

Celsion is a micro-cap stock, with a $32 million market cap, in the speculative and lucrative cancer drug targeting arena. The company is focused on developing a portfolio of innovative cancer treatments, directed chemotherapies, immunotherapies and RNA-based or DNA-based therapies. Celsion’s lead program is ThermoDox (Phase 3), which is a proprietary heat-activated liposomal encapsulation of doxorubicin targeting primary liver cancer. It is also in Phase 2 development for the treatment of recurrent chest wall breast cancer. Other targets are ovarian cancer and brain cancer.
Rigel Pharmaceuticals

On July 13, Rigel Pharmaceuticals Inc. (NASDAQ: RIGL) was started with a Buy rating and its price target was set at $6 at H.C. Wainwright. Rigel previously closed at $2.26, but it ended the week at $2.18. Its 52-week trading range is $1.88 to $3.68, and the consensus analyst price target is $7.25.

This biotech outfit has multiple preclinical and Phase 1, 2 and 3 drug studies going and has a mere $200 million market cap. One real risk for Rigel is that fostamatinib is involved in three different target studies. That means that any hiccup in one study may discourage or overshadow upside views on other indications.

Spark Therapeutics

Spark Therapeutics Inc. (NASDAQ: ONCE) was started with an Outperform rating and given a $70 price target at RBC Capital Markets on July 12. This call implied upside of close to 30% from the prior closing price of $54.47. Selling pressure during the week brought shares to a $53.08 close on Friday, and that would imply a potential upside of 32%, if RBC’s price target is hit. Spark Therapeutics has a 52-week range of $21.20 to $71.75 and a market cap of $6 billion.

Note that the consensus analyst target is only $59.60, but there is a street high analyst target north of $90. Spark targets one-time cures and treatments for rare genetic diseases. Its SPK-RPE65 is in Phase 3 clinical trial for the treatment of genetic blinding conditions. While it will target (and has received) orphan drug designations, targeting rare genetic diseases is often difficult and the price tags can come with sticker shock that may bring oversight or political backlashes.

TearLab

On July 12, Rodman & Renshaw started TearLab Corp. (NASDAQ: TEAR) with a Buy rating. It was assigned a $2 price target, over 200% higher than the $0.62 prior closing price. The market cap here is tiny at a mere $41 million, but TearLab has a 52-week trading range of $0.58 to $3.03.

Its target is dry eye disease, which can be very lucrative but is also a competitive target. TearLab develops and markets lab-on-a-chip technologies for eye care practitioners to test for dry eye disease markers at the point of care. Its TearLab Osmolarity Test diagnoses dry eye disease.