Long-time aggressive investors know that biotechnology stocks can offer huge upside and also can 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 recent research reports, analysts at Wedbush, Oppenheimer and Stifel focus on four companies that not only have data that could prove to be huge, but 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.

Cempra

This top biotech has been absolutely eviscerated since printing highs last summer. Cempra Inc. (NASDAQ: CEMP) is a clinical-stage pharmaceutical company focused on developing antibiotics to meet critical medical needs in the treatment of bacterial infectious diseases. Cempra’s two lead product candidates are currently in advanced clinical development. Solithromycin (CEM-101) has successfully completed two Phase 3 clinical trials for community-acquired bacterial pneumonia, and new drug applications for the intravenous and oral capsule formulations have been submitted to the FDA.

Solithromycin is licensed to company’s strategic commercial partner Toyama Chemical, a subsidiary of Fujifilm Holdings, for certain exclusive rights in Japan. Solithromycin is also in a Phase 3 clinical trial for uncomplicated urogenital urethritis caused by Neisseria gonorrhoeae or chlamydia.

The company recently released very positive results for a Phase 2, multi-center, randomized, double-blind study that was conducted by Toyama to evaluate the efficacy, safety and pharmacokinetics of solithromycin in Japanese patients. The Stifel analysts view the release of oral solithromycin data demonstrating numerically superior efficacy to levofloxacin in the Phase 2 study conducted by Toyama as a very positive result.

The Stifel price target for the stock is an incredible $51, while the Thomson/First Call consensus target is $38.91. The stock closed Monday at $18.67.

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.
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 is a gigantic $14, but the consensus target is $14.21. The shares closed Monday at $6.81.

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.

Wedbush has a huge $51 price target, and the consensus target is $32. The stock closed Monday at $17.42.

Sarepta Therapeutics

This is another top biotech that has been hit very hard this year. Sarepta Therapeutics Inc. (NASDAQ: SRPT) is a biopharmaceutical company that focuses on the discovery and development of RNA-based therapeutics for the treatment of rare, infectious and other diseases. Its lead product candidate is Eteplirsen, an antisense phosphorodiamidate morpholino oligomer therapeutic, which is in Phase 3 clinical development for the treatment of individuals with Duchenne muscular dystrophy, a genetic muscle-wasting disease caused by the absence of dystrophin.

Oppenheimer points out the company entered into a quiet period, which indicates that the analysis/submission of the dystrophin data to the FDA may be imminent. The original AdCom meeting was scheduled for January 22, with a PDUFA set for late February, but both were delayed for three months. Subsequent to the three-month delay, the FDA missed the May 26 PDUFA date and recently requested additional dystrophin data on June 6.

Oppenheimer noted in its report:

The FDA’s request for additional dystrophin data suggests that it is convinced that dystrophin levels previously demonstrated (~0.9% of normal) will be adequate for accelerated approval; although it’s possible slightly younger PROMOVI patients may respond better to treatment, and there is no scientific basis for believing PROMOVI biopsies will result in substantially numerically different dystrophin levels.

The $60 Oppenheimer price target is gigantic, against the consensus target of $21.62 and the most recent close at $17.85.

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Four big opportunities for aggressive investors, but 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.

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