The second half of 2020 is well underway, and with markets recovering, one of the strongest industries leading the charge has been biotech. Although the iShares Nasdaq Biotechnology ETF (NASDAQ: IBB) is only up about 12% year to date, there have been some breakout companies as a result of the coronavirus pandemic.
Practically any company attempting almost anything COVID-19 related has seen massive gains. However, other big winners in the industry are not tied to the pandemic, and there are likely more to come for the rest of the year.
Remember that biotechs offer big risk but big rewards as well. These are seen as some of the more speculative companies in the market because a single clinical trial could either be a huge sunk cost or the next blockbuster drug.
24/7 Wall St. has compiled a list of some speculative biotech plays that could see gains of up to 300% in the coming months. Remember that no single analyst call should ever be used as a sole reason to buy or sell a stock. We also have included the most recent short interest data on each company to show if there are widescale bets against these companies, or whether these are still flying under the radar.
Dynavax
Last week, Dynavax Technologies Corp. (NASDAQ: DVAX) was in the news with earnings, and H.C. Wainwright’s target hike from $12 to $14 in July was walked back down to $12 after the report. Dynavax shares recently hit $12 after big news-related buying interest, but the stock now is back under $8.
The company had been known for using the human body’s immune responses through toll-like receptor stimulation in a hepatitis B vaccine, but the newer interest now is in its co-development of a vaccine candidate to prevent COVID,-19 and the stock also moved on news that it was selling its SD-101 oncology program for up to $250 million in milestone payments plus future net royalties.
As of the most recent settlement date, 13.51 million shares are short, and it would take short sellers almost two days to cover all their bets. Dynavax most recently closed at $7.79 a share, in a 52-week range of $1.80 to $12.44. The consensus price target is $16.00.
ImmunoGen
This clinical-stage biotechnology outfit is known for targeting antibody-drug conjugate therapies for cancers. While ImmunoGen Inc. (NASDAQ: IMGN) is speculative and its revenues are effectively royalty-based at this point, one analyst sees nearly 200% of implied upside based on upcoming data. The analyst’s call came after its shares sold off, despite its revenues being nearly immaterial at this stage.
Canaccord Genuity’s John Newman reiterated his Buy rating and $12 price target for ImmunoGen earlier this month. His take is that its Soraya is still largely on track despite COVID-19-related delays as patients wanted to stay away from health care clinical study settings over fears of encountering the novel coronavirus.
Essentially, the firm sees positive Phase 2 data from the single-arm Soraya trial in the third quarter of 2021 rather than mid-2021, but this is also expected to support accelerated FDA approval. The firm also expects positive data from the Phase 3 Mirasol study in platinum-resistant ovarian cancer patients in the first half of 2022 that will support full approval. This sets up a long amount of time between now and then, but that’s nearly 200% in implied upside to the price target and it has a $703 million market cap.
Some 16.20 million ImmunoGen were short, with more than six days to cover. The stock last closed at $4.03, in a 52-week range of $1.95 to $7.07. The consensus price target is $6.96.
24/7 Wall St.Xencor
Xencor Inc. (NASDAQ: XNCR) is a $1.8 billion outfit that uses antibody product candidates in studies to treat cancer and autoimmune diseases. Wedbush Securities believes that is going to be worth a lot more than this. The firm’s David Nierengarten reiterated his Outperform rating, and the $50 price target was roughly 65% higher than the prior $30.09 closing price.
With the FDA approval of tafasitamab in combination with Revlimid in relapsed/refractory DLBCL Xencor is set to receive a $25 million milestone payment and royalties into the low double digits. The approval was expected but came before the August 30 PDUFA date. Wedbush views the product (Monjuvi) as a legitimate competitor to CAR-T therapies, and it sees expected sales of $82 million in 2021 rising to $459 million in 2023.
Mizuho also gave a positive view on August 5, noting that Zencor is building up its pipeline and that a valuation expansion is possible. Mizuho’s Mara Goldstein reiterated it as Buy and kept the $52 price target. While Mizuho does not expect all candidates to be successful, the totality of the pipeline and technology are likely to drive value, based on emerging therapeutics, in its view.
Xencor stock closed at $31.70, in a 52-week range of $19.35 to $42.28. The consensus price target is $45.73. Short interest for the stock was last seen at 4.37 million, with more than eight days to cover. This was a notable increase from the previous short interest reading of 3.84 million.
Viking Therapeutics
A nonalcoholic steatohepatitis (NASH) player, Viking Therapeutics Inc. (NASDAQ: VKTX) may have better drug news than its rivals. The company recently reported second-quarter results with notable Phase-2b VOYAGE dosing passing the six-month mark and advancing toward full 12 months of dosing.
Truist Securities (formerly SunTrust Robinson Humphrey) reiterated its Buy rating and $28 price target, which is up nearly 300% from its current levels of about $7.50. The firm’s report from Joon Lee believes that the FDA is comfortable with the full toxicity data. Some of the newer study data now is expected in the second half of 2021, and the firm sees NASH as a large unmet need as the leading cause of liver-transplants in advanced countries.
With shares at $7.69, the market cap is about $560 million. They have a 52-week trading range of $3.26 to $8.87. The consensus price target is $18.64. Short interest for the most recent settlement date came in at 9.96 million, with more than six days to cover. The previous short interest reading was 11.92 million.
24/7 Wall St.Lexicon Pharmaceuticals
Lexicon Pharmaceuticals Inc. (NASDAQ: LXRX) leverages its medicinal chemistry and knock-out mouse in vivo screening research platforms to create small molecule drug candidates for a variety of diseases. On July 30, Lexicon reported strong second-quarter results, citing Xermelo U.S. net sales of $9.0 million (better than the Bloomberg consensus of $8.7 million), representing a 21% increase year over year. Along with the financial results, Lexicon announced the broader realignment of its business model shifting focus toward the development of LX9211 in diabetic peripheral neuropathic pain and post-herpetic neuralgia.
Another development during the quarter was that the company entered into an agreement with TerSera Therapeutics in which TerSera will acquire exclusive rights to Xermelo in carcinoid syndrome diarrhea for $159 million in cash. Additionally, Lexicon will be eligible to receive milestone payments of up to $65 million, along with mid-teens royalties in net sales of Xermelo in biliary tract cancer.
Lexicon Pharma stock closed Monday at $1.93, in a 52-week range of $1.22 to $5.33. The consensus price target is $2.70. Short interest for Lexicon Pharma most recently came in at 11.37 million shares, with more than eight days to cover, an increase from the previous level of 10.40 million.
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