Returns, that’s the name of the investing game. At the end of the day, investors are after the names that can help them generate a profit in the stock market. It’s as simple as that. The hard part, though, is determining which investment opportunities have the best chance of outperforming the market in the years to come.
As not all stocks are created equal, Wall Street pros suggest doing some due diligence. This includes a close reading of what the analyst community has to say about the long-term growth prospects of a potential portfolio addition.
Bearing this in mind, we applied this strategy to our own search for compelling investments in the healthcare space. With TipRanks’ Stock Screener tool, we used the sector, analyst consensus rating and price target upside filters to scan the market for the crème-de-la-crème. As a result, we pinpointed 3 buy-rated healthcare names that have received substantial support from Wall Street analysts. One more thing – each boasts over 30% upside potential from current levels. Let’s jump right in.
GW Pharmaceuticals (GWPH)
GW Pharmaceuticals leads the way when it comes to plant-derived cannabinoid therapeutics. It developed Epidiolex, the first cannabis plant-derived medicine to be approved by the FDA, which can be used for seizures associated with drug-resistant forms of epilepsy, Lennox-Gastaut Syndrome and Dravet Syndrome. While it has certainly struggled over the last six months, the Street is behind GWPH.
On Monday, the company announced that Epidiolex revenue for the fourth quarter came in at $104 million, surpassing the $99 million consensus estimate. Not to mention this figure reflects an 18% quarter-over-quarter increase. While acknowledging that investors had expressed some doubts about the drug’s growth prospects, Cowen analyst Phil Nadeau argues that this performance should put these fears to bed.
Adding to the good news, the five-star analyst believes that Epidiolex approval for tuberous sclerosis complex (TSC) is very likely. Importantly, this approval would expand its “penetration of the broader refractory epilepsy population.” As the CDC estimates there are 3.4 million people with active epilepsy in the U.S., with approximately one-third having seizures despite current regimens, the market opportunity is huge.
An approval for TSC indication could also increase the average per patient dose of Epidiolex and allow for greater uptake among focal seizure patients. “These results may widen Epidiolex’s dosing range by allowing physicians additional dosing flexibility for those patients who need it. The TSC data also establishes the efficacy of Epidiolex in focal seizures,” Nadeau noted.
All of the above caused the analyst to conclude that the full value of the drug hasn’t been built into the share price. As a result, Nadeau reiterated an Outperform rating and $200 price target. Should the target be met, shares will be in for a 69% twelve-month gain. (To watch Nadeau’s track record, click here)
What does the rest of the Street think? It turns out that they wholeheartedly agree with Nadeau. With 12 Buy ratings and no Holds or Sells, the message is clear: GWPH is a Strong Buy. If that wasn’t enough, the $200.70 average price target puts the upside potential at 69.5%. (See GW Pharmaceuticals stock analysis on TipRanks)
Agios Pharmaceuticals (AGIO)
Using its expertise in cellular metabolism and precision medicine, Agios Pharmaceuticals has developed a product pipeline to fight cancer and other rare genetic diseases. After it shared its vision for the company in the next five years, one analyst sees AGIO’s growth story as just getting started.
Needham’s Chad Messer tells investors that management’s TIBSOVO guidance is encouraging. Expecting an increase in uptake for both the relapsed and frontline settings, the company predicts that full year 2020 sales could land within the range of $105 million to $115 million, an 80% year-over-year growth rate if achieved.
With the drug currently being evaluated for further label expansion from frontline combinations in acute myeloid leukemia (AML) and approvals in myelodysplastic syndromes (MDS) and cholangiocarcinoma (CCA), the analyst thinks that TIBSOVO will be able to capture most AML patients with an IDH1 mutation in the next few years.
Additionally, AGIO initiated two expansion cohorts in combination with taxanes in non-small-cell lung carcinoma (NSCLC) and pancreatic cancer in its third quarter and top-line data from both mitapivat pivotal studies should be released in 2020. “Mitapivat could be approved in adults with PKD by 2021, and in pediatric patients by 2024. Agios will also present data from the Phase II thalassemia study and provide details on a pivotal program in 2020. A Go/No-Go decision is expected for mitapivat in sickle cell anemia later this year. AG-946, a mitapivat follow-on, will enter the clinic in 2020,” Messer noted.
Based on everything that the healthcare company has going for it, Messer decided to stay with the bulls, maintaining the Buy recommendation. The five-star analyst’s $71 price target implies upside potential of 35%. (To watch Messer’s track record, click here)
Looking at the consensus breakdown, other analysts generally take a similar approach when it comes to AGIO. 8 Buys and 1 Hold assigned in the last three months add up to a Strong Buy consensus rating. A potential twelve-month climb of 24% could be in the cards given the $62.43 average price target. (See Agios stock analysis on TipRanks)
Daré Bioscience (DARE)
Following its 100% rise this week, the talk on Wall Street has shifted to Daré Bioscience. The massive gain came after the company, which develops novel therapies to improve the treatment options in women’s health, broke the news of its exclusive licensing agreement with Bayer for U.S. commercial rights to its non-hormonal, one-monthly vaginal contraceptive, Ovaprene.
As part of the agreement, Daré will receive an undisclosed upfront payment, which could be up to $310 million in commercial milestones and tiered double-digit royalties. After a pivotal study is conducted, Bayer can obtain exclusive rights to commercialize Ovaprene in the U.S. If Bayer ultimately decides to make the $20 million opt-in, this will cause the exclusive license to go into effect.
Maxim analyst Jason McCarthy argues that as Bayer will most likely make the $20 million payment, this deal reflects the large potential for Ovaprene. “Bayer sees the value in Ovaprene and is coming in now, with the license agreement, to be a part of the development process. This is the largest and possibly the only development stage deal in the category. We see this as validating for Ovaprene and Daré,” he explained.
Given that Grand View Research estimates the contraceptive market could reach up to $11.6 billion by 2025, there is a significant opportunity. Noting that Bayer is already one of the largest players in the women’s health space, McCarthy stated, “The addition of Ovaprene is expected to expand the company’s contraceptive pipeline as the first and only non-hormonal vaginal ring product offered to women.”
With this in mind, McCarthy left both his Buy rating and $3 price target as is. This conveys the analyst’s confidence in Daré’s ability to soar 94% over the next twelve months. (To watch McCarthy’s track record, click here)
According to the consensus breakdown, McCarthy is the only analyst that has reviewed the stock in the last three months. To this end, the consensus rating is a Moderate Buy and the average price target matches that of McCarthy’s. However, given its impressive recent climb, more analyst ratings could be on the way.
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