Health and Healthcare

4 Biotech and Specialty Pharma Stocks With 80% to 200% Upside Potential

Lee Jackson

Published: May 10, 2017 8:30 am

Last Updated: January 12, 2020 12:10 pm

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

Four separate new reports from the analysts at Stifel focus in on companies that not only have data that could prove to be huge, but all four are offering aggressive accounts the best entry points in some time. Some of these stocks are very speculative, and though rated Buy, they are only appropriate for very aggressive portfolios.

Dicerna Pharmaceuticals

This small cap company has third-quarter data that could be huge. Dicerna Pharmaceuticals Inc. (NASDAQ: DRNA) is a ribonucleic acid (RNA) interference-based biopharmaceutical company. The company operates in the segment of discovery, research and development of treatments based on its RNA interference (RNAi) technology platform.

Dicerna is focused on the discovery and development of treatments for rare inherited diseases involving the liver and for cancers that are genetically defined. The company uses its RNAi technology platform to build a pipeline in these therapeutic areas. It develops dacryocystorhinostomy (DCR)-Primary Hyperoxaluria Type 1 (PH1) for the treatment of PH1 by targeting the gene encoding the liver enzyme glycolate oxidase.

The Stifel analysts noted in their report:

With the balance sheet now fortified as a result of the recent convertible preferred financing, management can now execute on a number of IND-enabling studies which should allow for three programs to enter the clinic by year-end 2018. We will be particularly interested in any competitive differentiation management may be able to establish with the DCR-PHXC program – and management suggested there may be some additional clarity on this front provided in conjunction with the upcoming International Workshop on PH1 (July 14-16) where PHYOS natural history data will also be presented. We continue to believe current valuation fails to reflect what we believe to be the intrinsic technology value of a differentiated RNAi drug discovery/development platform.

The Stifel price target for the stock is a whopping $9, while the Wall Street consensus is $5.70. The shares closed most recently at $3.07.

Intrexon

This is a leader in the synthetic biology area. Intrexon Corp. (NYSE: XON) is a life sciences and biotechnology platform company. It licenses an extensive tool kit for manipulating DNA, proteins and cells, which can be used by its collaborators to develop and commercialize new and improved biologically based products for the health care, food, energy, environmental and consumer end markets.

Intrexon and the firm’s partner, Fibrocell, received and FDA Orphan Designation for FCX-007 for the treatment of dystrophic epidermolysis bullosa, which includes recessive dystrophic epidermolysis bullosa (RDEB). In addition, FCX-007 has been granted Rare Pediatric Disease Designation and Fast Track Designation by the FDA for treatment of RDEB. FCX-007 is a gene therapy product candidate for the treatment of RDEB, a congenital and progressive orphan skin disease caused by the deficiency of the protein type VII collagen (COL7). FCX-007 is a genetically modified autologous fibroblast that encodes the gene for COL7.

Stifel notes that the companies received a recommendation from the Data and Safety Monitoring Board to continue Phase 1 and 2 trials with FCX-007 for the treatment of RDEB, following a review of safety data from the first patient treated. No product-related adverse events were reported.

Stifel has a stunning $57 price target, and the posted consensus target is $37.83. The shares closed Tuesday at $19.44.

Mallinckrodt

This company has been on a mergers and acquisitions binge over the past three years, and it is a top pharmaceutical stock to buy. Mallinckrodt PLC (NYSE: MNK) is a global specialty biopharmaceutical and medical imaging business that develops, manufactures, markets and distributes specialty pharmaceutical products and medical imaging agents.

The company’s areas of focus include therapeutic drugs for autoimmune and rare disease specialty areas, like neurology, rheumatology, nephrology and pulmonology, as well as neonatal critical care respiratory therapies and analgesics and central nervous system drugs.

Top Wall Street analysts recently met with management and key takeaways were that U.S. health care policy change will be gradual, but the industry views greater price transparency, positively and MSD-LDD Acthar growth is supported by data build-out and volume gains. Stifel feels that Wall Street underappreciates the company’s pipeline, as clinical timelines for StratGraft and Terlipressin remain on track.

The $85 Stifel price target compares with the consensus target of $73.62. The stock closed Tuesday at $44.55 per share.

Horizon Pharma

The stock was hit hard on earnings, but it may be a great but for speculative accounts looking for a bounce back. Horizon Pharma PLC (NASDAQ: HZNP) is a specialty pharmaceutical company based in Ireland, and through its subsidiaries, develops and commercializes medicines for the treatment of arthritis, pain and inflammatory diseases.

The company’s best known products include Actimmune for reducing the frequency and severity of serious infections associated with chronic granulomatous disease, and Duexis, a proprietary tablet formulation for the relief of signs and symptoms of rheumatoid arthritis and osteoarthritis.

The company missed market expectations on both the top and bottom lines in its first-quarter report. The company said revenues grew 7.9%, driven by strong growth from Horizon’s orphan and rheumatology business units, but offset by lower sales in the primary care business unit.

Horizon also has announced a deal to acquire River Vision Development and its development-stage medicine teprotumumab (RV001) for an upfront cash payment of $145 million, plus potential future milestone and earn-out payments contingent on the satisfaction of certain regulatory milestones and sales thresholds. The company anticipates a potential peak annual sales opportunity for teprotumumab, if approved, in excess of $250 million in the United States.

Stifel lowered its price target $20 from $35 but kept the Buy rating intact. The consensus target is $21.40, and the stock closed on Tuesday at $9.92.

These two very speculative biotechs and two specialty pharmas offer more safety and actual earnings. All four make sense for risk-tolerant accounts looking for some big alpha possibilities.