COVID-19 has turned the world upside down, but the market’s most recent surge has Wall Street observers wondering if the situation is on the mend. Rallying on April 17 thanks to encouraging data from Gilead’s remdesivir COVID-19 drug trial and the government’s stimulus measures, the three major U.S. stock indexes rounded out the week in the green. With some investors now looking to take on a bit more risk, they are turning to the ultimate risk/reward plays: biotech stocks.
Biotech companies are unique in that only a few key indicators like positive data or regulatory approvals can signal they are well on their way to generating sustainable revenue. As a result, an update on the progression of a candidate can act as a catalyst for shares, instantly propelling them in either direction. Thus, the returns can be massive, but so can the losses.
Taking all of this into consideration, we used TipRanks’ database to get the full scoop on three compelling biotech stocks with upcoming Prescription Drug User Fee Act (PDUFA) dates, the deadline by which the FDA must decide to approve or reject a new drug application. According to the investing platform, each ticker has received enough praise from Wall Street analysts to earn a “Strong Buy” consensus rating. Not to mention there’s hefty upside potential for each. Let’s jump right in.
Evofem Biosciences Inc. (EVFM)
Evofem has been at the forefront when it comes to women’s reproductive health, with it hoping to improve the lives of women throughout the world. The company is gearing up for its Phexxi product’s May 25 PDUFA date, and analysts are betting on a favorable outcome.
Weighing in for Cantor Fitzgerald, analyst Louise Chen calls Phexxi, its Multipurpose Vaginal pH Regulator (MVP-R) that keeps vaginal pH within the normal range of 3.5 to 4.5 even in the presence of semen to prevent pregnancy, an “innovative, first-in-class product”, and thus expects it to ultimately get a thumbs up. She estimates that even if only 885,000 women out of the 17 million who want or need a non-hormonal contraceptive get a prescription for the candidate, sales could reach $1 billion.
Chen added, “We think women will choose Phexxi over other methods of birth control because: 1) she does not need to be tethered to a regimen/ device, men have had condoms since the 1800s, 2) studies show that Phexxi enhances sexual pleasure while hormonal birth control diminishes it. After only one use, women reported a 2.7x improvement in their sexual experience.”
That being said, Chen sees an even larger opportunity for its EVO100 candidate in STI prevention, thanks to the large unmet need. Citing the Phase 2b study results, the analyst noted, “There was a 50% relative risk reduction for chlamydia and 78% relative risk reduction for gonorrhea. EVO100 was granted Fast Track designation for prevention of chlamydia in women and QIDP designation for prevention of gonorrhea. EVFM expects potential U.S. approval for EVO100 in 2022. We would also note that this is the fifth year in a row that chlamydia and gonorrhea are on the rise.”
Given that Chen also believes the Street has undervalued the opportunity for potential OUS partnerships, it should come as no surprise that she stayed with the bulls. To this end, Chen reiterated an Overweight rating and $9 price target, indicating 77% upside potential. (To watch Chen’s track record, click here)
Based on 100% Street support, the analyst community agrees with Chen, and EVFM gets a Strong Buy from the analyst consensus. At $12.33, the average price target implies even larger upside potential, with the figure landing at 143%. (See Evofem price targets and analyst ratings on TipRanks)Epizyme (EPZM)
Epizyme wants to change the way cancer and other serious diseases are treated by using epigenetic medicines. As its TAZVERIK drug has already received the go ahead for use in epithelioid sarcoma (ES) and could get approval for an additional indication, Wall Street focus has locked in on EPZM.
The PDUFA date for TAZVERIK’s use in 3L+ follicular lymphoma (FL) is slated for June 18, and Wedbush’s David Nierengarten thinks the odds are in the company’s favor. “We fully expect that the company’s lead asset, the oral EZH2 inhibitor TAZVERIK, will follow up its recent approval in epithelioid sarcoma (ES) with accelerated approval in 3L+ follicular lymphoma (FL) irrespective of EZH2 status… which we view as grounded in its first-in-class novel mechanism of action, compelling single-agent efficacy profile, already attained relatively favorable label around safety (including no required AdComm), and the cancer’s limited treatment options,” he commented.
Nierengarten goes so far as to say Wall Street is underestimating TAZVERIK’s blockbuster potential, stating that its unique clinical profile and competitive pricing could translate to widespread access and rapid adoption. According to the five-star analyst’s projections, worldwide sales across indications stand to hit the $1 billion mark in full year 2024. It should also be noted that the therapy’s clinical profile could lead to investigation in earlier lines of treatment as well as in conjunction with standard treatments and other investigational agents, expanding its opportunity in FL.
The good news doesn’t end there. “Because of this outlook, and EPZM’s status as a predominantly single-asset, small molecule commercial stage oncology company, we view EPZM as a particularly attractive bolt-on acquisition candidate to prospective larger pharmas with established oncology portfolios,” Nierengarten said.
In line with his bullish stance, Nierengarten left an Outperform call and $30 price target on the stock. This implies shares could climb 70% higher in the next twelve months. (To watch Nierengarten’s track record, click here)
Turning now to the rest of the Street, other analysts have also been impressed. 6 Buys and 2 Holds issued in the last three months add up to a Strong Buy consensus rating. Should the $28.50 average price target be met, a 61% twelve-month gain could be in the cards. (See Epizyme stock analysis on TipRanks)Heron Therapeutics (HRTX)
Last but not least we have Heron Therapeutics, which has made noteworthy strides in the pain management space. While COVID-19 forced the FDA to push back the original March PDUFA date for its HTX-011 candidate by three months, several members of the Street remain unphased by the delay.
Preparing for the new June 26 PDUFA, management believes the date won’t be further affected by the ongoing public health crisis. Writing for Needham, analyst Serge Belanger thinks the delay is most likely related to the FDA Pain Division’s reputation of missing or extending PDUFA dates, and doesn’t reflect any issues with HTX-011.
Even though the FDA had issued a Complete Response Letter (CRL) which required a reinspection of the HTX-011 contract manufacturing site, the inspection addressed concerns raised in the CRL. It was also an important pre-approval step completed before the FDA enacted travel restrictions that could have prevented the visit.
“We view the upcoming and long-awaited approval of HTX-011 as the key catalyst for HRTX. Since the HTX-011 NDA has been in front of the FDA since 2018 and a pre-approval inspection has been conducted, odds are good that the upcoming late-June PDUFA will not be affected by COVID-19. We expect HTX-011 to be approved with a best-in-class label and play a prominent role in the rapidly growing post-op pain management market,” Belanger explained.
The Needham analyst doesn’t dispute the fact that most elective procedures have been delayed due to COVID-19, but he argues that once the situation improves, the candidate will be able to compete in the expanding post-op pain management market.
Based on everything HRTX has going for it, Belanger left his Buy rating and $44 price target unchanged. Given this target, the upside potential comes in at a whopping 193%. (To watch Belanger’s track record, click here)
What does the rest of the Street have to say? Out of 5 recent reviews, 100% were bullish, making the consensus rating a Strong Buy. With an average price target of $36.20, the possible twelve-month gain lands at 141%. (See Heron stock analysis on TipRanks)