Doubling your money in the stock market really isn't that hard if you don't mind waiting. For example, a sum invested in the S&P 500 six years ago would have doubled already.
For those of you interested in a shorter time frame, there are a few biotech stocks that recently received some highly favorable coverage from Wall Street investment banks.
Blindly following every eye-popping analyst price target is a great way to lose money, but they are right every once in a while. Let's try measuring their chances of getting it right this time.
|Company||Market Cap||Recent Closing Price||Price Target||Implied Upside||Investment Bank|
|Apellis Pharmaceuticals (NASDAQ:APLS)||$1.7 billion||$27.35||$52||90%||Oppenheimer|
|Dynavax Technologies (NASDAQ:DVAX)||$262 million||$4.03||$20||396%||Cantor Fitzgerald|
|RedHill Biopharma (NASDAQ:RDHL)||$209 million||$7.40||$17||156%||WBB Securities|
1. Apellis Pharmaceuticals: Soliris competition?
Oppenheimer Analyst, Justin Kim recently began coverage of Apellis Pharmaceuticals with a price target that was more than double the stock's price at the time. Kim's excited about the company's lead candidate, a potential new autoimmune treatment called APL-2.
This biotech's experimental complement system inhibitor is currently up against Soliris from Alexion Pharmaceuticals' (NASDAQ:ALXN) in a pivotal head-to-head trial with patients affected by paroxysmal nocturnal hemoglobinuria (PNH). People who acquire this rare life-threatening blood disorder suffer bouts of red blood cell (RBC) destruction that causes them to wake up with urine darkened by hemoglobin that burst from those RBCs.
Soliris and a similar, longer-lasting treatment called Ultromiris are currently the only available treatment options for PNH and they're on pace to record combined sales above $4 billion this year. In July, Apellis reported that APL-2 bosted hemoglobin while reducing signs of damage. If it pulls off a repeat performance and outperforms the standard treatment for PNH, APL-2 could become a blockbuster drug too.
Continued success as a treatment for PNH could double Apellis' stock price, but that isn't the only catalyst on the company's horizon. Apellis will also begin enrolling patients into a pivotal trial with APL-2 as a potential treatment for geographic atrophy. Also known as advanced age-related macular degeneration (AMD), this disease is blinding around a million Americans, and there aren't any available treatments that stop or even slow its progression.
In a midstage study, monthly injections of APL-2 slowed the progression of geographic atrophy by 29% compared to the placebo group. A repeat performance in an upcoming pivotal study for the treatment of advanced AMD could send the stock screaming higher next year.
2. Dynavax Technologies: There and back again
After an uphill battle to earn FDA approval for a next-generation hepatitis B vaccine, Heplisav-B, Dynavax nearly abandoned its only commercial-stage product to focus on a couple of experimental cancer therapies that were a long shot at best.
Following disappointing data from its oncology candidates, Dynavax announced plans to restructure around its Heplisav-B launch in May. First-quarter sales of the vaccine reached just $5.6 million but Elemer Piros at Cantor Fitzgerald thinks the company's relaunch effort under a new CEO can drive this figure through the roof.
The standard hepatitis B vaccine that nearly every healthcare professional has received for over a decade requires three injections, while Heplisav-B gets the job done with just two. Believe it or not, a lot of patients never show up for their third injection of the old vaccine, and increased compliance from Hepislav-B could drive demand through the roof.
3. RedHill Biopharma: It's good to have options
Around a year ago, Redhill Biopharma stock jumped after the company announced that Crohn's disease patients treated with one of several late-stage candidates in its pipeline, RHB-104, were significantly more likely to experience remission than those taking a placebo.
More recently, the FDA agreed to review an application for the treatment of Helicobacter pylori infections with Redhill's lead candidate Talicia. The company also boasts three commercial stage products that contributed $8.4 million to top-line revenue last year.
The FDA will issue its decision regarding Talicia on or before Nov. 2, which could cause the stock to rocket higher. If the agency isn't swayed, though, RHB-104 could help Redhill pick up the pieces in 2020.
Grains of salt required
The analysts that think these stocks can double your money aren't wrong, but the thing you need to remember about price targets from investment bank analysts is that most of them work for banks that would like to do business with the companies they rate. That doesn't necessarily mean they aren't to be trusted, but you don't want to make any investment decisions based solely on an investment bank analyst's price target.