Growth stocks have lost momentum in August after a strong start to the year. The market is worried about the impact of a possible recession, high inflation, and high interest rates on the future earnings of companies. However, smart investors know that market downturns can create attractive buying opportunities.
Healthcare stocks have been especially hit hard this month. Innovative companies in the fields of drug development and medical imaging, such as Agenus (AGEN 40.84%), BioCryst Pharmaceuticals (BCRX), and Nano-X Imaging (NNOX 0.45%) have all experienced a significant drop in their stock prices in the past 30 days. Here's why these three beaten-down growth stocks may be worth buying on the dip.
An underappreciated immuno-oncology company
Agenus is a biotechnology company developing immunotherapies for cancer and infectious diseases. The company has a diverse pipeline of candidates, including monoclonal antibodies, bispecific antibodies, cell therapies, vaccines, and adjuvants.
However, Agenus recently announced a strategic realignment to focus its resources on the development of a potent anti-cancer combo therapy, consisting of the dual checkpoint inhibitors botensilimab/balstilimab. Management expects to file for the combo therapy's approval as a treatment for advanced colorectal cancer in 2024.
This cost-cutting strategy is a smart decision. Agenus has less than three full quarters of cash remaining at its current burn rate, and raising a large chunk of capital through a public offering is unwise at this point with the company's share price at $1.33 as of this writing. This move ought to significantly extend its cash runway and lessen its financing burden.
What's the bottom line? Agenus is a risky pharma stock, but one that may be worth buying heading into this next stage of its life cycle. Second-line colorectal cancer drugs are expected to haul in more than $22 billion in sales by 2031, and botensilimab/balstilimab's emerging clinical profile puts it in the running to be a top treatment option in this setting, assuming approval.
An incredibly cheap rare-disease stock
BioCryst Pharmaceuticals is a biopharmaceutical company developing and commercializing oral drugs for rare diseases. The company's lead product is Orladeyo, an oral inhibitor of plasma kallikrein that the FDA approved in December 2020 for the prevention of hereditary angioedema (HAE) attacks. HAE is a rare genetic disorder that causes swelling in various parts of the body, such as the throat, abdomen, and limbs. Orladeyo is the first oral therapy for HAE that can be taken once daily, offering a convenient and effective alternative to injectable treatments.
The global market for HAE prophylaxis is on track to hit $6.2 billion a year in annual sales by 2025. As a result, Orladeyo has the potential to hit at least $1 billion in annual sales. The company also has other promising candidates under development, such as the once-daily oral Factor D inhibitor BCX10013, although its pipeline has been a sore spot for investors of late.
Why buy BioCryst stock? The company is deeply undervalued compared with its peers in the rare disease space, with a price-to-sales ratio of 3.35 based on 2024 estimates. Many similar companies have a ratio above 5, suggesting that BioCryst has room to grow. The market is pessimistic about BioCryst's recent pipeline setbacks, but its approved drug, Orladeyo, should be enough to make it profitable and generate value for shareholders in the long term.
An undervalued medical imaging stock
Nano-X Imaging is a medical imaging company that aims to revolutionize the field with its novel technology called Nanox.ARC. This is a digital X-ray device that uses a silicon chip instead of a traditional X-ray tube, which reduces the cost and size of the equipment significantly.
The company plans to deploy its devices globally through a pay-per-scan model, making medical imaging more accessible and affordable for millions of people who lack access to it. Nano-X recently received FDA clearance for Nanox.ARC in the United States.
Why is Nano-X Imaging stock a buy? Wall Street thinks the company is on the cusp of an exponential growth trend from a revenue generation standpoint. Reflecting this optimism, analysts covering the stock think it holds an upside potential of 314% from current levels.
Now, there are some important risks associated with the medical imaging specialist's novel business plan. However, its shares may still be worth considering as part of a well-rounded portfolio, given the high degree of unmet medical need represented by medical imaging in both emerging markets and in key demographics within most developed nations.
