After a record-breaking August surge, volatility has made its way back to the Street. With COVID-19 continuing to impact the financial landscape and the race to the White House narrowing, the recent market volatility convey the uncertainty hanging in the balance.
That’s not to say compelling plays can’t be found in the current financial environment. In particular, Wall Street analysts cite one area of the market that has been gaining steam: healthcare stocks. Additionally, the pros point out there are opportunities in this space that come with affordable price tags.
It should be noted that these stocks are risky in nature, with their shares prone to explosive movements on account of only a few key catalysts like updates on clinical studies or regulatory approvals. The good news is that a favorable outcome can drive massive share price appreciation. However, the bad news is that the opposite holds true.
Bearing this in mind, we used TipRanks’ database to pinpoint two healthcare stocks trading for less than $5 per share with exciting prospects, according to the analyst community. Each ticker boasts a “Strong Buy” consensus rating and massive upside potential.
Cidara Therapeutics (CDTX)
Cidara Therapeutic works to provide long-acting therapeutics designed to improve the standard of care for patients facing serious fungal or viral infections. Shares currently change hands for $2.98, reflecting an attractive entry point, according to the analyst community.
Representing Maxim, 5-star analyst Jason McCarthy cites the company's Phase 3 ReSTORE study, which evaluates Rezafungin for the treatment of candidemia and invasive candidiasis. The study has faced impacted enrollment due to the COVID-19 pandemic, and the analyst now expects data to come in 1H21.
Diving deeper into the details, Rezafungin is a long-acting, once-weekly, echinocandin. This class of antifungals was the first to target the fungal cell wall and act as an inhibitor of β-1,3-D.glucan synthase, the enzyme that generates the critical cell wall component, β-1,3-D-glucan.
“While effective, the available echinocandins have limitations, including only being available intravenously and requiring daily administration. The latter creates exposure limit issues, as well as lower exposure at infection sites, which can lower cure rates and may create a breeding ground for resistance. As a once-weekly, Rezafungin may overcome these hurdles, including increasing infection exposure to drug,” McCarthy commented.
Along with the ReSTORE study, the asset is also advancing through the Phase 3 ReSPECT trial for prevention of invasive fungal infections. It is targeting the prevention of both yeasts and molds in patients undergoing bone marrow transplant. The first patient in this trial was dosed back in May.
Adding to the good news, CDTX’s Cloudbreak platform reflects additional value, in McCarthy’s opinion. Expounding on this, he stated, “This viral targeting platform is unique in that it's not an antiviral, not a vaccine and not an antibody. Rather, it's a two-pronged approach in one, targeting the virus and steering the immune response towards the infection. The platform is applicable to many virus types including influenza, RSV, HIV and coronaviruses (including SARS-CoV-2).”
To this end, McCarthy rates CDTX a Buy along with a $10 price target. Should his thesis play out, a potential twelve-month gain of 246% could be in the cards. (To watch McCarthy's track record, click here)
Turning now to the rest of the Street, other analysts are on the same page. With 100% Street support, or 6 Buy ratings to be exact, the consensus is unanimous: CDTX is a Strong Buy. The $6.67 average price target brings the upside potential to 130%. (See CDTX stock analysis on TipRanks)
Calithera Biosciences (CALA)
Targeting cancer in a fundamentally different way, Calithera Biosciences’ onco-metabolism approach brings an enhanced perspective to fighting the disease. With a $3.60 share price, several analysts are pounding the table on this name ahead of a key upcoming data release.
CALA is gearing up to read out topline data from the pivotal Phase 3 CANTATA study of telaglenastat, its oral glutaminase inhibitor, in late Q4 2020 or early Q1 2021, a slight delay from the previous guidance of Q4 2020. This study was designed to evaluate the therapy in combination with cabozantinib, marketed as Cabometyx by Exelixis, in patients with advanced renal cell carcinoma. The primary endpoint is progression-free survival (PFS), and the secondary outcome measure is overall survival (OS).
Writing for H.C. Wainwright, analyst Swayampakula Ramakanth argues that the delay is “non-material.” He noted, “We believe the topline data readout of the CANTATA study would be a major catalyst in the near term.”
Adding to the good news, in July, CALA kicked off a Phase 1b study of CB-280, its patented arginase inhibitor, in adult patients with cystic fibrosis (CF) and chronic airway infection. This study will enroll 32 patients and is designed to evaluate the safety and ideal dose range of CALA’s candidate in combination with existing therapies for CF patients, including CFTR modulators, with patients set to receive CB-280 or placebo orally twice daily for 14 days.
“According to management, the CF study is currently enrolling patients in the first cohort. We expect Calithera to report initial data from the study in 2021, which could include a number of efficacy biomarker assessments, such as expiratory nitric oxide and serum arginine levels,” Ramakanth commented. While the analyst doesn’t currently factor this program into his model, he believes “success in this program could provide a meaningful upside to our current estimates.”
Everything CALA has going for it keeps Ramakanth with the bulls. Along with a Buy rating, the analyst leaves a $9.50 price target on the stock. This target suggests shares could climb 167% higher in the next year. (To watch Ramakanth’s track record, click here)
What does the rest of the Street have to say? Only Buy ratings have been issued in the last three months, so the consensus rating is a Strong Buy. In addition, the $8.25 average price target indicates 132% upside potential. (See CALA stock analysis on TipRanks)
To find good ideas for healthcare stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
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