If you're looking for a stock that could make dramatic gains in the foreseeable future, consider this biopharmaceutical player that has been having a lousy year so far.
Shares of Apellis Pharmaceuticals (APLS +0.05%) are down by about 62% from the peak they reached in January. However, investment bank analysts who follow the drugmaker think its best days are still ahead. Bank of America recently put a $61 per share price target on Apellis, which would equate to a 129% gain from recent prices.
NASDAQ: APLS
Key Data Points
Before rushing out to buy a stock just because a Wall Street analyst says it can more than double your money, it's important to realize that Bank of America can always adjust its price target downward if things don't work out. Repairing the damage a bad call could cause your portfolio isn't as easy.
Why Apellis Pharmaceuticals tanked this year
Shares of Apellis Pharmaceuticals have been under pressure because investors are concerned about the sales trajectory of its vision preservation treatment, Syfovre. Although Syfovre has been approved for use in the U.S., a European regulatory committee repeatedly issued negative opinions on its marketing authorization application in the E.U. this year.
In February 2023, the Food and Drug Administration (FDA) approved Syfovre to treat geographic atrophy, an advanced form of age-related macular degeneration. Second-quarter Syfovre sales came in at an annualized $618 million.
The Syfovre launch has been successful, but its position as the only available treatment for geographic atrophy didn't last long. In August 2023, the FDA approved Izervay to treat the same patient population.
Japan's Astellas Pharma (ALPMY +1.52%) invested $5.9 billion to acquire the company that developed Izervay. Competing with a large, determined pharmaceutical company won't be easy, but so far, it seems Apellis has the upper hand. Izervay's sales grew slower than Syfovre's to an annualized run rate of about $333 million during the quarter that ended June 30.
Why Wall Street's bullish for Apellis Pharmaceuticals
Analysts are encouraged by Syfovre's resilience as an eye treatment despite competition from Izervay. With more than 1 million Americans impacted by geographic atrophy, its sales could top out above $2.5 billion annually in this indication alone.
Plus, there's a chance the active ingredient in Syfovre, called pegcetacoplan, could earn approval as a treatment for patients with another pair of rare diseases: C3 glomerulopathy (C3G) and primary immune-complex membranoproliferative glomerulonephritis (IC-MPGN). Both diseases involve severe kidney damage and lack effective treatment options.
In a phase 3 study, randomized C3G and IC-MPGN patients received either pegcetacoplan or a placebo. Treatment with pegcetacoplan reduced the amount of protein in patients' urine -- a signal of kidney damage -- by 68.1% which was significantly more than the placebo group.
Analysts are also encouraged by pegcetacoplan's safety profile. Investigators recorded more adverse events in patients given the placebo than in the group given the drug.
Pegcetacoplan is already approved under the brand name Empaveli to treat another rare kidney damage disease, paroxysmal nocturnal hemoglobinuria. There's less opportunity for blockbuster sales in the C3G and IC-MPGN spaces, but revenue from this group could be significant. Altogether, pegcetacoplan's total sales could exceed $3 billion by 2030.
Time to buy?
Apellis Pharmaceuticals' market cap is around $3.3 billion -- about 4.1 times its annualized second-quarter sales. Commercial-stage biotech stocks typically trade at mid-single-digit multiples of their annual sales, regardless of how high those sales run.
If total pegcetacoplan sales reach their expected peak, this stock could rise to several times its present value. Adding a small position in this growth stock to a diverse portfolio and holding it over the long run could be a smart move.
