Quant trading guru Jim Simons is calling it a day, sort of.
The mathematician and cryptologist is famous in the investing world for bringing his analytical eye to the world of the stock exchange, creating both the quant trading revolution and a personal fortune now estimated at more than $22 billion. His has been a career of multifaceted success, and his innovations on Wall Street have influenced the strategies of two successive generations of traders.
Simons has stepped down as Chairman of Renaissance Technologies ahead of his 83th birthday next month. However, Simons remains involved as a board member.
On his way out, Simons staked new positions in two biotech stocks. Following Simons’ stock moves is a viable strategy for investors of all strips. To get an idea of just how good a strategy, we’ve opened up the TipRanks database and pulled the details on these two names; It appears the rest of the Street projects plenty of upside. Let’s find out what makes them compelling buys.
Zogenix, Inc. (ZGNX)
We’ll start with Zogenix, a small-cap biotech firm working on new therapies for the treatment of rare diseases. The company has two lead products: Fintepla, which has been approved by the FDA for use in treating epilepsy caused by Dravet Syndrome, and MT1621, which is in mid-stage trial as a treatment for Thymidine Kinase 2 deficiency (TK2d), a rare and frequently fatal metabolic disease in children.
The company has seen total net US product sales of $9.6 million since the drug’s July 2020 launch; of that total, $8.1 million was realized in 4Q20. As of December 31, 2020, there were 550 Dravet syndrome patients enrolled in Fintepla programs. Also in December, the European Commission approved Fintepla for use, and the drug launched in Germany. Fintepla is currently undergoing testing as a treatment for Lennox-Gastaut syndrome, and other rare epileptic diseases, to expand the patient base.
Zogenix’ second drug candidate, MT1621, was acquired in 2019 from Modis Therapeutics. MT1621 is a potential treatment for TK2d, a rare and deadly disease of early childhood. The drug acts through Deoxynucleoside substrate enhancement therapy, a novel approach that has demonstrated efficacy in early phase studies. Zogenix needs to complete a Phase 1 human renal PK study, a nonclinical tox study in dogs, and genotoxicology/reproductive tox studies, and management indicated that it plans to make a New Drug Application (NDA) to the FDA in 1H22.
The company’s solid position is bound to attract investor attention – and Jim Simons bought in to the tune of more than 245,000 shares in Q4. His stake in the company is now worth over $5 million.
Covering Zogenix for Needham, analyst Serge Belanger noted that the Fintepla launch in the US was ‘off to a promising start.’
“It appears that late-2020 trends of enrollment in the REMS program and Fintepla onboarding have continued into early-2021. All patients receiving Fintepla as part of U.S.-based OLE trials are expected to be on commercial product by 1Q21-end,” Belanger wrote.
To this end, Belanger rates ZGNX a Buy, and his $48 price target implies a robust 131% upside potential for the next 12 months. (To watch Belanger’s track record, click here)
Overall, Wall Street appears to agree with the Needham view that Zogenix is a stock worth buying. The recent analyst reviews break down 6 to 2 in favor of Buy versus Hold, making the consensus rating a Strong Buy. Shares are priced at $20.74, and the $47 average target suggests a 128% upside on the one-year horizon. (See ZGNX stock analysis on TipRanks)
Wave Life Sciences (WVE)
The next stock we’re looking at is Wave Life Sciences, which focuses on precision medicine, designing oligonucleotides to safely deliver more effective, precisely targeted, therapeutic agents. The company has a pipeline of 10 drug candidates, in various stages of development in the treatment of serious diseases with, in the company’s words, ‘few or no treatment options.’
Wave Life Sciences uses an integrated approach to develop new nucleic acid therapeutics. The approach uses rational design to counter flaws in genetic replication, giving more consistent therapeutic effects from medications that are specifically targeted to particular diseases.
The company’s development program targeting Huntington’s disease is the most advanced. This is a severe inherited neurodegenerative disorder, with symptoms usually setting in between ages 30 and 50, and worsening over time. The company’s two most advanced drug candidates, WVE-120101 and WVE-120102, are in Phase 1b/2a trials, with reports on results expected by the end of this month. In addition, open-label extension (OLE) trials are ongoing for patients outside the US.
In addition to these two drug candidates, Wave has several programs ongoing for the treatment of other rare diseases. The pipeline includes potential therapies for ALS, Duchenne muscular dystrophy, and various retinal diseases. These pipeline projects are all at preclinical stages.
During the fourth quarter, Jim Simons’ Renaissance bought 235,620 shares of WVE last quarter, a substantial buy that shows confidence in the company’s pipeline. At current valuation, the stake – a new position for Simons – is worth $2.224 million.
5-star analyst Andrew Fein, of H.C. Wainwright, noted that Wave’s stock performance this year will depend largely on the results of the PRECISION HD-1 and HD-2 studies, and he believes there’s reason for optimism.
“[Our] positive view of the PRECISION studies stems from: (1) the selective targeting of either SNP1 or SNP2 knocks down expression of mutant Huntington protein (mHTT) while leaving wild-type HTT largely intact, which may improve the safety profile compared to competitor therapies that also target wild-type proteins…; (2) novel ASO modification chemistry makes a compelling case as seen by data, showing significantly higher transcript knockdown relative to traditional approaches; (3) Wave’s intrathecal dosing strategy should overcome systemic inflammatory responses seen in other programs; and (4) higher dosing cohorts should alleviate investor concerns of efficacy relative to competitor programs,” Fein opined.
On the strength of these studies, Fein maintains his Buy rating and his $20 price target. At current levels, that target suggests an upside of 112% for the year ahead. (To watch Fein’s track record, click here)
All in all, there are 5 reviews on record for WVE shares, with 3 saying Buy and 2 to Hold, making the analyst consensus a Moderate Buy. The average price target here is $17.80, implying a one-year upside of 84% from the share price of $9.76. (See WVE stock analysis on TipRanks)
To find good ideas for biotech 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.