[cnxvideo id=”625483″ placement=”ros”]Needless to say, the biotech world has had a very difficult 18 months. 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, including President Trump, over drug pricing. While there is always an argument for lower prices, taking down an entire sector is extreme.
In a new research report, SunTrust Robinson Humphrey’s outstanding biotech analyst, Edward Nash, and his team focus in on companies that have upcoming clinical data that could prove to be huge. They cited these reasons why the stocks are very attractive now in the report.
- Catalysts over the next 6-9 months that we believe will have strong impact on the share price.
- Strong balance sheets that remove financing overhang and allow focus to be on clinical data.
- Catalysts are all related to pivotal data that will determine a regulatory submission decision.
It’s important to remember that these stocks are only suitable for very aggressive accounts, because while the catalyst events have a good chance of happening, if they don’t the downside could be big as well. All five stocks are rated at Buy by SunTrust.
Sage Therapeutics
This is one of the larger companies that the SunTrust team likes. Sage Therapeutics Inc. (NASDAQ: SAGE) a clinical-stage biopharmaceutical company that develops and commercializes novel medicines to treat central nervous system disorders. Its lead product candidate includes SAGE-547, a proprietary intravenous formulation of allopregnanolone that is in Phase 3 clinical development as an adjunctive therapy for the treatment of super-refractory status epilepticus (SRSE), as well as for the treatment of postpartum depression (PPD).
The analysts feel that the Phase 3 data should be out this year, and they list the probability of a positive outcome of 60% if released in the first half for treatment of SRSE and 50% in the second half of 2017 for PPD treatment.
The $95 SunTrust price objective compares with the posted Wall Street consensus target price of $83.08. The shares closed most recently at $68.40 apiece.
Versartis
This company has hit our insider buying screens twice in the past two months. Versartis Inc. (NASDAQ: VSAR) operates as an endocrine-focused biopharmaceutical company in the United States. It is developing VRS-317, a long-acting recombinant human growth hormone that is in Phase 3 clinical trials for the treatment of growth hormone deficiency.
The SunTrust team expects the Phase 3 data to come out in the third quarter this year, and they feel the probability for a positive outcome is 70%.
The SunTrust price target for the shares is $25, but the consensus target is higher at $27.13. The shares closed Monday at $20.60, up almost 8% on the day.
Otonomy
This micro-cap stock has massive upside potential. Otonomy Inc. (NASDAQ: OTIC) focuses on the development and commercialization of therapeutics for diseases and disorders of the ear in the United States. It offers Otiprio, a ciprofloxacin otic suspension for use during tympanostomy tube placement surgery in pediatric patients. Otiprio has also completed a Phase 3 clinical trial for treating swimmer’s ear and a Phase 2 clinical trial for treating acute otitis media with tubes.
The company also develops OTO-104, a sustained-exposure formulation of the steroid dexamethasone that is in Phase 3 clinical trial for the treatment of Ménière’s disease and other inner ear conditions; and OTO-311, a sustained-exposure formulation of N-methyl-D-aspartate receptor antagonist gacyclidine, which has completed a Phase 1 clinical safety trial for the treatment of tinnitus.
The SunTrust team sees the Phase 3 data for Ménière’s disease out in the second half of this year and assigns a 60% probability of a positive result.
The SunTrust price objective is a massive $45. The consensus price target is $28.60, and the shares closed Monday at $13.10 apiece.
Tetraphase Pharmaceuticals
This company has been close for some time, and it may be ready for a big positive clinical data release. Tetraphase Pharmaceuticals Inc. (NASDAQ: TTPH) develops various antibiotics for the treatment of serious and life-threatening multidrug-resistant infections. Its lead product candidate is eravacycline, an intravenous and oral antibiotic for use as a first-line empiric monotherapy to treat resistant and multidrug-resistant infections, including multidrug-resistant Gram-negative infections.
The company has completed a Phase 3 clinical trial of eravacycline with intravenous administration for the treatment of complicated intra-abdominal infections, or cIAI, and initiated a Phase 3 clinical trial of eravacycline for the treatment of complicated urinary tract infections with intravenous-to-oral transition therapy.
The SunTrust team expects the data by the fourth quarter of 2017 and puts a 60% probability of a positive outcome. They note that Tetraphase plans to file a marketing authorization application in the third quarter with the first Phase 3 in cIAI.
The Sun Trust team set a price target of $14 for the stock. The consensus target is at $8.75, much closer to Monday’s close at $8.37 a share.
Catalyst
This company is well named as it is also expecting one soon. Catalyst Pharmaceutical Inc. (NASDAQ: CPRX) focuses on the development and commercialization of therapies for people with rare debilitating diseases. Its lead product candidate is Firdapse, a proprietary form of amifampridine phosphate, which completed its Phase 3 clinical trial for the treatment of patients with Lambert-Eaton myasthenic syndrome. It is in a small blinded clinical trial to treat congenital myasthenic syndrome, as well as is in Phase 2/3 clinical trial for the treatment of MuSK-antibody positive myasthenia gravis.
The SunTrust team expects that data in the second half of 2017 and assigns a 40% probability of success. The firm’s price target for the shares is $5, and the consensus target is at $4.38. The stock closed most recently at $1.66 a share.
[wallst_email_signup]
These are extremely aggressive and potentially volatile stocks and trades. They are only suitable for speculative accounts with a very high risk tolerance. With that caveat in mind, some big gains could be there for biotech traders.
Top Gaining Stocks
Top Losing Stocks