Markets slipped last month, and they continue to slip in mid-November. But a savvy investor can still find great deals – bargain-priced stocks with heavy upside potential. The pharmaceutical industry offers a large number of small to mid-sized companies, with lower entry prices on their stock, and interesting products in development giving them a positive prospect for future revenues.
These stocks are especially interesting to look at in light of the recent election. RBC Capital wrote, before the voting, “our best case of a mixed House/Senate would result in the continuation of status quo politics and make it challenging for Trump to implement meaningful policy initiatives through consensus legislation…” That has now come to pass, and we are in the unique position of being able to test the rest of RBC’s prediction: “…a scenario that could improve investors' comfort owning biotechs.”
Let’s take a look at TipRanks data on three biotech pharmaceutical firms, each with an entry price under $70 per share and an upside potential over 100%. For investors looking to make an affordable entry to the biotech sector, these stocks show an attractive combination of risk and reward, in a regulatory environment that may benefit from gridlocked stability in the near future.
Aimmune Therapeutics, Inc. (AIMT – Research Report)
Food allergies might not seem like a big deal, but any parent knows the impact they have. Schools, or even individual classrooms, have made news in recent years for banning a variety of common allergenic foods: peanuts, eggs, dairy. The issue usually raises a stink between parents of kids with allergies, parents of kids without allergies, and school administrations on what can be done to keep kids safe and avoid inconveniencing, well, everyone.
Aimmune Therapeutics looks for solutions to this problem. The company focuses on desensitization and treatment therapies for food allergies and accidental exposure, to make exposure less dangerous and provide treatment options beyond the current ‘avoidance and epinephrine’ regimen. Aimmune currently has programs in development for the treatment of peanut, egg, and walnut allergies. The company has not yet reached the stage of FDA approval for its medications.
Like many pharma stocks that have not yet put a product onto the market, AIMT posted a quarterly loss in their recent Q3 report. The company declared losses of $0.89 per share, against an expected loss of $0.92 per share. On a positive note, the company noted completion of a safety study for AR101, a peanut allergy treatment in Phase 3 testing.
Industry stock analysts see plenty of growth potential ahead. William Tanner (Track Record & Ratings) of Cantor Fitzgerald gave the stock a $62 price target while specifically citing the AR101 study. He added, “Filing of the BLA (anticipated by YE18) should position the company well, in our view, to bring the product to the U.S. market in late 2019.”
AIMT has a current share price of $29 with an average price target of $60, giving an upside potential of 102%.
AnaptysBio, Inc. (ANAB – Research Report)
AnaptysBio focuses on the treatment of severe inflammatory disease through the use of antibody technology. Like Aimmune above, the company does not yet have an approved product to market, but does have several promising medications in the pipeline. The product furthest in development, etokimab, is a broad-spectrum treatment with applications for dermatitis, asthma, and chronic rhinosinusitis.
ANAB’s recent Q3 report was short on financial details – without a marketable product, the company does not yet show a revenue stream. The report did, however, show progress on multiple pipeline projects, with at least two studies expected to produce workable data in the second half of 2019. In all, ANAB reported six projects in Phase 1 and Phase 2 clinical testing.
Reviewing the quarterly report, analysts see reason for optimism in ANAB stock. Stifel’s Derek Archila (Track Record & Ratings) stated, “We remain positive on ANAB shares over the next ~12 months and think etokimab's emerging profile could be very competitive relative to existing treatment options within blockbuster indications. We maintain our Buy rating and $127 target price.”
Cantor Fitzgerald’s Eliana Merle (Track Record & Ratings) concurred on the upbeat outlook, adding, “We don't see fundamental reasons for the stock's weakness and think this is a highly favorable risk/reward for a story with two clinical assets that we believe are highly active.” She set a $140 price target on ANAB.
The current share price is $68. The average price target, $151, shows a 120% upside.
Nektar Therapeutics (NKTR – Research Report)
Nektar develops drugs for the treatment of cancer, auto-immune disease, and chronic pain. Unlike the two companies shown above, Nektar has products on the global market, and has entered strategic partnerships with other biotech firms to provide additional marketing, distribution, and (if needed) manufacturing for those products.
By partnering with other companies for product marketing and distribution, Nektar is able to concentrate its resources on developing new medications. The company currently has nine products in various stages of clinical testing, including Phase 3 testing on NKTR-181 for chronic lower back pain. When it does gain approval, NKTR-181 will have an important built-in marketing edge over the competition, as it is a non-addictive opioid alternative to pain treatment.
Given the headlines of the opioid painkiller addiction epidemic, Nektar is positioning itself well to market a product that potentially offers alleviation of both addiction problems and patients’ underlying chronic pain issues.
In reviewing Nektar’s performance, Difei Yang (Track Record & Ratings) of Mizuho Securities pointed out the company’s extensive pipeline. She set a price target of $81, indicating significant upside potential of 113%. As Yang pointed out, Nektar’s modest royalty earnings are not the company’s most valuable asset; that would be the array of new products in the pipeline, promising lucrative future earnings.
Nektar’s average price target is $77 against a share price of $38, giving a 101% upside.
Author: Michael Marcus