When searching for the stocks that can see explosive growth overnight, look no further than the healthcare industry. Unlike other names, healthcare companies often rely on only a few key milestones like data readouts or FDA approvals. So, when a particular result goes a company’s way, the news can act as a catalyst that sends shares soaring. However, investors looking to gain exposure to this space should know that this also makes these stocks riskier as unfavorable outcomes can have the opposite effect.
As a result, the strength of investment opportunities in this sector can be harder to determine. So what’s the best way to gauge healthcare stocks ahead of big catalysts? We suggest turning to Wall Street analysts for guidance.
Using TipRanks, an investing platform that measures and tracks the performance of analysts, we were able to access market data on 3 stocks as they approach significant catalysts this month, including what the analysts have to say about each. The platform also revealed that all of these Strong Buy tickers boast impressive upside potential from current levels. Here’s the diagnosis.
Acasti Pharma (ACST)
Like headline-making biotech Amarin, Acasti Pharma focuses on the development and commercialization of prescription drugs using omega-3 fatty acids. The company’s lead candidate, CaPre, is currently progressing through a Phase 3 program for severe hypertriglyceridemia, a condition that leads to abnormally high levels of triglycerides in the bloodstream. With new CaPre TRILOGY 1 and 2 trial data expected this month, all eyes are on ACST.
While top-line data from the TRILOGY 1 trial was originally slated for December, the company had to delay the readout as a result of a delay in data processing and transfer from the central testing laboratory to the statistical consultants for independent and external validation. Even though the delay was technical in nature, some investors were not impressed.
That being said, Oppenheimer analyst Leland Gershell remains unphased. “With the complex logistics and enormity of work required of several people to process Phase 3 trial results bumping up against the holidays and their attendant slowdown, we are not surprised to learn that the report of top-line data from CaPre’s TRILOGY 1 will slip past December… Our expectation for a positive trial outcome is unchanged, and we recommend investors take advantage of the current weakness,” he explained. Bearing this in mind, the five-star analyst maintained an Outperform rating and $7 price target, implying a potential twelve-month gain of 220%. (To watch Gershell’s track record, click here)
Like Gershell, Aegis Capital’s Nathan Weinstein sides with the bulls. After an FDA AdCom voted unanimously to expand Amarin’s Vascepa label to include cardiovascular risk, the analyst believes that ACST stands to benefit. “In many ways we think it’s still early days in this brave new iteration of the prescription omega-3 category, where enhanced attention is being paid to composition, potential cardiovascular risk reduction benefits, and potentially other patient benefits…To the extent there end up being multiple positive outcomes trials in the space across both EPA only and mixed EPA/DHA compositions, we think that could lend credence to the view that cardiovascular risk reduction is a an effect of omega-3 medications not limited to a pure EPA composition,” he commented. To this end, Weinstein left his Buy rating and $3 price target as is.
Looking at the consensus breakdown, 100% of the analysts covering ACST see it as a Buy, making the consensus rating a unanimous Strong Buy. Additionally, the $6.02 average price target puts the upside potential at 175%. (See Acasti stock analysis on TipRanks)
VBI Vaccines Inc. (VBIV)
VBI Vaccines is best known for developing vaccines for immuno-oncology and infectious diseases. Its hepatitis B vaccine, Sci-B-Vac, has already been approved in Israel and ten other countries, with it currently in a Phase 3 program in the U.S., Canada and Europe. Ahead of the data readout for Sci-B-Vac in the next few weeks, Canaccord’s John Newman likes what he’s seeing.
The analyst tells clients that he expects the top-line Phase 3 CONSTANT trial data to demonstrate the efficacy of the vaccine, and should include immune repression measures such as geometric mean concentration (GMC) of antibodies across the three independent manufactured groups of Sci-B-Vac. “We continue to believe Sci-B-Vac will be viewed positively by regulators and achieve approval in the US and EU after positive readout in CONSTANT in January 2020. We look forward to an update of two-dose noninferiority data with inclusion of patients from the CONSTANT dataset,” he wrote in a note to clients.
On top of this, Newman cites its VBI-1901 candidate for glioblastoma multiforme (GBM) and VBI-1501A for cytomegalovirus (CMV) infection as key points of strength for the company, expecting continued positive data from each.
He further added, “Brii Bio and VBI plan to initiate enrollment of a phase 1b/2a proof-of-concept study in subjects with chronic HBV infection in 4Q19E which could allow for initial first-inhuman proof of concept data readout in 2H20E.”
Based on all the above factors, the five-star analyst reiterated his bullish call. While Newman did reduce the price target from $5 to $4, this still conveys his confidence in VBIV’s ability to climb 270% higher in the next twelve months. (To watch Newman’s track record, click here)
What does the rest of the Street think? Given that 3 Buys and no Holds or Sells have been assigned in the last three months, the stock earns a Strong Buy consensus rating. Not to mention the $3.67 average price target brings the upside potential to 170%. (See VBI Vaccines stock analysis on TipRanks)
Veru Inc. (VERU)
Veru uses a novel approach to develop and commercialize medicines for prostate cancer. According to one analyst, 2020 could be a big year for Veru, starting with the announcement of new top-line Phase 2 data for Zuclomiphene citrate for hot flashes caused by prostate cancer hormone therapy.
The readout, which is scheduled for this month, is an interim topline look at the frequency of hot flashes as well as the safety of the 10mg and 50mg doses. Brandon Folkes of Cantor Fitzgerald notes that a clinically meaningful reduction in hot flashes for Zuclomiphene Citrate is between 11% and 26%, which is how he thinks the treatment will be evaluated by the FDA. In addition, the company’s recent FY4Q19 earnings release indicates that there haven’t been cases of side effects like gynecomastia, breast pain or venothromboembolic events (blood clots in legs or lungs, or stroke) that are typically associated with off label use of steroidal estrogens and progestins for hot flashes.
“Thus given the lack of these common side effects being seen in the Phase 2 trial, we expect VERU to move forward to test the 100mg dose, which will require 30 patients. We believe that decision should be viewed as a positive. Given that zuclomiphene is an estrogen, we would expect to see dose dependent efficacy in Zuclomiphene citrate, and the lack of safety concerns which enable VERU to move to test the higher 100mg dose is likely to result in a more compelling product offering, should the product come to market,” Folkes stated.
To top it off, Phase 1b data from VERU-111 for castration resistant metastatic prostate cancer is expected in early 2020, with Veru already indicating that there’s evidence of substantial antitumor activity.
All of this prompted Folkes to maintain a Buy rating along with a $6 price target. At this target, a 67% twelve-month rise could be in the cards. (To watch Folkes’ track record, click here)
Turning now to other analysts, they appear to be on the same page. With 3 Buys compared to no Holds or Sells, the message is clear: Veru is a Strong Buy. The average price target of $5.83 suggests 62% upside potential, just below Folkes’ forecast. (See Veru stock analysis on TipRanks)