To buy or not to buy, that’s the question. For even the most seasoned Wall Street observers, determining the ideal time to pull the trigger on a particular stock can be a challenge. These decisions involve considering what type of gains are expected, more consistent growth achieved over the long haul or rapid upward climbs.
More risk-tolerant investors are often drawn to the latter, enticed by the possibly of sky-high returns delivered at the drop of a hat. So, where can these stocks with huge upside potential be found? The healthcare sector. Its nature positions many companies to see their share prices multiply as a single update can either send shares through the roof or down the drain.
With this in mind, we set out on our own search to find compelling plays in this volatile industry. Given the sheer size of the market, we used TipRanks’ Stock Screener tool to uncover 3 healthcare stocks that the analysts believe can double in the next year. In fact, each has attracted enough support from Wall Street to earn a “Strong Buy” consensus rating.
Rockwell Medical (RMTI)
Focusing on end-stage renal disease (ESRD) and chronic kidney disease (CKD), Rockwell Medical develops innovative therapies to help improve the lives of patients. Even with its leading iron maintenance therapy, Triferic, already receiving FDA approval for use in dialysis patients, analysts believe that its growth story is just getting started.
The company announced on January 14 that it had finalized a license and supply agreement with Sun Pharma, a subsidiary of Sun Pharmaceutical Industries Ltd., for the rights to commercialize Triferic. Based on the terms of the agreement, RMTI will receive an undisclosed upfront sum to provide the therapy to Sun Pharma, who will be its exclusive development and commercialization partner in India. The company is also entitled to royalties on net sales and milestone payments.
As Sun Pharma is the largest pharmaceutical company in India, boasting over $4 billion in annual sales, and there are about 120,000 patients receiving hemodialysis in the country, it’s no wonder the Street is excited. Citing Sun Pharma’s standing in the Indian pharmaceutical market, H.C. Wainwright analyst Raghuram Selvaraju sees the agreement as boding well for the company. “We note Sun Pharma’s acquisitive business strategy and believe that Sun may eventually have interest in acquiring the Triferic franchise if it demonstrates rapid growth,” he explained.
Furthermore, the company’s IV Triferic is approaching its March PDUFA date, and Selvaraju points out that the drug is capable of reaching peak sales.
As a result, the five-star analyst left his Buy rating and $11 price target unchanged. Should the target be met, a 402% twelve-month gain could be in the cards. (To watch Selvaraju’s track record, click here)
Brandon Folkes of Cantor Fitzgerald added, “Beyond the India opportunity, we expect meaningful news flow from RMTI this year. A U.S. approval of IV Triferic is expected in 2020, as well as a submission of the IV formulation in Canada, potential approval of Triferic in Chile, and updates on the China and EU opportunities. All of which have the potential to drive positive inflections for the stock this year […] We believe Triferic is an innovative product that will drive significant value for RMTI shareholders. We expect product approvals and upward earnings revisions in our DCF model to drive RMTI’s stock higher.”
Bearing this in mind, he stayed with the bulls, reiterating his Overweight call. At $11, his price target matches Selvaraju’s. (To watch Folkes’ track record, click here)
With 100% Street support, the message is clear: Rockwell Medical is a Strong Buy. Adding to the good news, the average price target of $9.33 puts the upside potential at 326%. (See Rockwell Medical price targets and analyst ratings on TipRanks)
Durect Corporation (DRRX)
Biopharma company Durect has definitely had a rough going recently. Following an AdCom’s split vote after reviewing its Posimir treatment for post-surgical pain, shares dipped 12% premarket. That being said, two members of the Street just told investors that they are still optimistic enough to get on board.
One of the analysts singing DRRX’s praises is B.Riley FBR’s Mayank Mamtani, highlighting its “first and only-of-its kind treatment, DUR-928, for multiple liver diseases, notably alcoholic hepatitis (AH).” He noted, “We believe that the strong efficacy and excellent safety observed with DUR-928 therapy in the Phase 2a trial has paved the path for late-stage development and primarily contributed to the 600%-plus stock move in 2019. We also believe that DUR-928 has the potential to become a part of combination treatment regimens for nonalcoholic steatohepatitis (NASH).”
Additionally, Mamtani points to its transition away from legacy operations associated with drug delivery platforms and its potential to be a partner for a larger biopharma name as making it a standout. In line with his bullish take, the five-star analyst started coverage with a Buy rating and $5 price target. (To watch Mamtani’s track record, click here)
Like Mamtani, Craig-Hallum’s Francois Brisebois sees huge potential based on DUR-928. “We believe shares are undervalued today given the opportunity for DUR-928 in AH alone, to which we have ascribed the vast majority of our valuation,” he commented. The analyst adds, “It’s hard to overstate DUR-928’s market potential in AH. We derive a TAM of $3 billion based upon the 117,000 annual hospitalizations and what we see as a fairly conservative $25,000 one-time cost of therapy given that hospitalizations cost are over $50,000 per patient in the first year.”
It comes as no surprise, then, that Brisebois initiated coverage by publishing a bullish call. At the $6 price target, shares could soar 277% over the next twelve months. (To watch Brisebois’ track record, click here)
In general, the rest of the Street is on the same page. 4 Buys and 1 Hold assigned in the last three months coalesce into a Strong Buy analyst consensus. Not to mention the $4.72 average price target implies 197% upside potential. (See Durect stock analysis on TipRanks)
Zynerba Pharmaceuticals (ZYNE)
Specializing in transdermal cannabinoid therapies, Zynerba wants to help patients suffering from Fragile X syndrome (FXS), a condition that can cause anxiety, social withdrawal and violent outbursts. On the heels of its announcement that it successfully achieved its patient screening target in its pivotal CONNECT-FX trial, which is evaluating its topical cannabinoid Zygel in children and adolescents with FXS, some believe that huge gains are in store.
With pivotal results expected in June, Ladenburg Thalmann & Co. analyst Michael Higgins thinks the development team’s experience, Phase 2 results, CBD’s anxiolytic activity and the recruitment make a strong data readout very likely. On top of this, he believes management’s strategy of enrolling patients with more severe FXS will pay off. “We agree with management that along with the increased dosing the enrollment criteria should ensure Zygel’s efficacy in treating problematic FXS behaviors will be most appropriately demonstrated,” he explained.
Even though Zynerba is a single-product company, Higgins points out that it has at least three events coming up in its second quarter and other regulatory, clinical and marketing-based events in 2020 that could prove to be major catalysts. These include Phase 3 CONNECT-FX data, which if positive could result in Fast Track designation, as well as data from the Phase 2 BRIGHT, Phase 2 INSPIRE and from Phase 2 DEE trials. In addition, Zygel could meet the needs of patients with autism spectrum disorder, 22q11.2 deletion syndrome and rare and ultra-rare epilepsies known as developmental and epileptic encephalopathies, three other large market indications.
To this end, Higgins kept his Buy rating and $26 price target as is. This conveys his confidence in ZYNE’s ability to skyrocket 417% in the next twelve months. (To watch Higgins’ track record, click here)
Looking at the consensus breakdown, it has been relatively quiet when it comes to analyst activity as only two other reviews have been issued recently. However, both were bullish, making the consensus rating a Strong Buy. It also doesn’t hurt that the $18.67 average price target brings the potential twelve-month gain to 271%. (See Zynerba stock analysis on TipRanks)
To find good ideas for healthcare stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.