Since early January, Wall Street has given the investing community a not-so-subtle reminder that stocks can go down just as easily as they can move higher. In March, the benchmark S&P 500 registered its 39th official correction (i.e., a decline of at least 10%) since the beginning of 1950, while the technology-driven Nasdaq Composite briefly dipped into bear market territory.
While these declines can be worrisome in the short-term, they've historically marked a great time to buy for patient investors. Over the long run, every notable drop in the major indexes has eventually been wiped away by a bull market rally.
But for a select group of stocks, Wall Street is looking for more than just a bounce off of their lows. According to three analysts, the following small-cap companies have the potential to rocket higher by as much as 709% over the next year. The big question is, can these moonshot stocks deliver for their shareholders?
Ocugen: Implied upside of 525%
The first small-cap stock that at least one Wall Street analyst believes is moonward bound is clinical-stage biotech company Ocugen (OCGN 0.34%). Although it's researching therapies to treat an assortment of eye diseases (as its name would imply), the company has gained most of its notoriety due to Covaxin, an experimental COVID-19 vaccine.
The high-water price target on Wall Street comes from Robert LeBoyer of Noble Financial. LeBoyer's $15 target on Ocugen represents potential upside of 525% from where shares ended this past week. According to LeBoyer, Covaxin has clear-cut competitive advantages over other vaccines.
As for the backstory on Covaxin, it was developed by India's Bharat Biotech and commercially licensed by Ocugen in North America (U.S., Canada, and Mexico). Last year, Bharat conducted a large-scale study on nearly 26,000 people with Covaxin, ultimately resulting in a vaccine efficacy (VE) of 78%. Considering how many people have yet to receive their initial COVID-19 inoculations worldwide, especially in emerging markets, Covaxin has a real shot at carving out a role as a COVID-19 therapy.
However, things are considerably more complicated for Ocugen. Even if Covaxin winds up being a moneymaker globally, Ocugen only sees revenue if the U.S., Canada, and/or Mexico approve the vaccine or grant it some form of emergency authorization status. Initial inoculation and booster campaigns have been fairly successful in North America, which may leave little room for Covaxin to succeed.
Furthermore, Covaxin's 78% VE could struggle to stand out when compared to approved vaccines from Pfizer/BioNTech and Moderna, which respectively produced VEs of 95% and 94.1% in large-scale clinical trials in late 2020.
To make matters worse, the U.S. Food and Drug Administration (FDA) declined to grant Covaxin emergency-use authorization for pediatric use (ages 2 to 18) and has temporarily placed a clinical hold on a phase 2/3 study involving Covaxin in the United States.
To put it succinctly, I don't believe Ocugen has any shot at hitting $15 within the next 12 months.
Intercept Pharmaceuticals: Implied upside of 404%
Another moonshot stock with incredible upside potential is liver disease-focused drug developer Intercept Pharmaceuticals (ICPT -0.69%).
Piper Sandler analyst Yasmeen Rahimi has the loftiest price target on Wall Street for Intercept. This past December, Rahimi reiterated her firms' target of $82, which would imply a more than quintupling in the company's shares over the next year. Rahimi believes data from the Reverse study, which is examining obetacholic acid (OCA) as a treatment for nonalcoholic steatohepatitis (NASH) in over 900 compensated cirrhosis patients, as well as the Regenerate study, will be enough for Intercept to file a new drug application for OCA in NASH.
On one hand, OCA did something that no other experimental NASH drug has ever done: It met a co-primary endpoint in a phase 3 trial. In the Regenerate study, which was reported over three years ago, OCA led to a statistically significant improvement in liver fibrosis without a worsening of NASH, which was one of two co-primary endpoints.
The issue with OCA appears to be its safety. The highest and most-effective dose caused pruritus (itching) in 51% of study participants and led to roughly 9% of those high-dose patients discontinuing the trial. The FDA ultimately issued a Complete Responses Letter to Intercept in late June 2020 that requested the company submit additional efficacy and safety data.
If there's a silver lining to this data, it's that OCA is approved to treat primary biliary cholangitis (PBC) under the brand-name of Ocaliva, which means there's already an extensive safety profile on the drug. Whereas Ocaliva is on pace for as much as $405 million in worldwide annual sales in 2022, OCA in NASH could be a billion-dollar drug each year, even for a relatively small subset of NASH patients.
If OCA were to fail to gain approval by the FDA for NASH, Intercept's downside is probably limited given its steady sales via Ocaliva from PBC. But if it's approved as the first NASH treatment, the scope of its potential patient pool could send its shares markedly higher.
Bionano Genomics: Implied upside of 709%
The third and final moonshot stock with gargantuan upside potential is genome-analysis company Bionano Genomics (BNGO 3.17%).
Oppenheimer analyst Kevin DeGeeter thinks quite highly of Bionano, as evidenced by his price target of $14. If this figure were to become a reality, shares would rise by more than 700% over the next year! In DeGeeter's view, Bionano's optical genome mapping (OGM) system, known as Saphyr, is faster, cheaper, and possibly better at identifying structural genome variations, than all other OGM technologies.
Bionano Genomics first began turning heads back in December 2020. A handful of studies involving Saphyr demonstrated both its sensitivity for recognizing large structural genome variations, as well as its cost-effectiveness relative to other OGM systems. The thinking here is that drug developers and researchers are going to want to own or access Saphyr to target the structural variations behind some of the hardest-to-treat diseases.
Something else to consider is that Bionano closed a $230 million common stock offering (before fees and commissions) in January 2021. Although selling stock is dilutive to existing shareholders, it's given the company a war chest of capital to lean on as it attempts to expand Saphyr's reach on a research and enterprise level. In other words, Bionano has multiple years' worth of cash at its disposal.
The downside is that Saphyr isn't FDA approved as a medical diagnostic tool. While this hasn't stopped the company from placing 164 of its Saphyr systems as of the end of 2021, it does cloud Bionano's sales potential without the FDA's green light.
While I do believe Saphyr is intriguing, and the risk-versus-reward with Bionano Genomics' stock certainly favors the latter, I don't see shares getting anywhere close to $14 unless the FDA grants Saphyr approval.