The Ups and Downs of Biotech: Cerus Corporation (CERS) and BioCryst Pharmaceuticals, Inc. (BCRX)

The volatile biotech sector did not fail to live up to its reputation this week. Analysts weigh in on Cerus Corporation (NASDAQ:CERS) as the stock spiked following a new partnership with the Red Cross. On the other hand, BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX) plummeted earlier this week due to a disappointing readout. Below, analysts explain why they remain bullish on both stocks.

Cerus Corporation

Shares of Cerus spiked nearly 6 percent yesterday after the company announced a partnership with the Red Cross. Analyst Karen Koski of BTIG explains why this deal is great news for the company, and why Cerus’s blood safety technology is poised to become the standard in the U.S.

Cerus is a biotech company that focuses on producing blood safety products. Its flagship product, INTERCEPT, mitigates risk of transfusion-transmitted infections in plasma and platelets. Koski explains that The American Red Cross is “the largest supplier of blood products in the U.S., collecting and processing ~40% of our blood supply.” With such high volume, the contract can reach $65 million in revenue for Cerus, annually.

Aside from the monetary value of the contract, the partnership is important elsewhere. Koski explains, “First, it helps put the debate around whether or not our blood supply is ‘safe enough’ to rest as the largest blood supplier in the U.S. has decided it is not.” The analyst speculates that it is not a coincidence that the Red Cross agreed to this partnership in the midst of the Zika virus outbreak, which can reportedly be transferred via blood transfusions. Koski continued, “Second, we now believe that smaller blood centers will be forced to adopt INTERCEPT” as the Red Cross supplies many hospital with blood.

Since the Red Cross is such a large organization, Koski expects it will take “several quarters” for INTERCEPT to take effect. Cerus expects INTERCEPT to be in about 25% of Red Cross sites by the end of the year, and nationwide in 2017. Due to this profitable partnership, Koski reiterates a Buy rating on the stock with an $8 price target.

According to TipRanks, 5 analysts are currently bullish on CERS while 1 remains on the sidelines. The average 12-month price target between these 6 analysts is $8.25, marking a 37% potential upside from current levels.


BioCryst Pharmaceuticals, Inc.

Shares of BioCryst plummeted nearly 70 percent earlier in the week when the company announced that OPuS-2, a pipeline drug for blood disease hereditary angioedema (HAE), failed to meet its endpoint. Andrew Fein of H.C. Wainwright weighed in on the company in light of this disappointing data readout.

Instead of dwelling on the bad news, the analyst still finds value in the drug because “the disease has a validated target (kallikrein) and therapeutic goal has a validated MoA (kallikrein inhibition); and (b) the company’s two agents are able to inhibit kallikrein, with the clinical challenge so far appearing to relate to formulation and PK rather than efficacy and safety.”

More importantly, he explains, BioCryst is still poised to “survive and escape the black hole of the ‘low cash multiple’” because the company has a lot in store for 2016. Fein elaborates, “In our view, news flow in the next 10 months is likely to reboot the value perception of oral HAE drugs, whose development timeline may have changed but whose inherent clinical and commercial strength has not.”

Overall, Fein maintains a Buy rating on the stock but is lowering his price target to $10 from $24. Analysts seem to be split over this stock. According to TipRanks, 1 remains bullish, 1 is bearish, and 5 are on the sidelines. The average 12-month price target between these 7 analysts is $4, marking a 111% potential upside from current levels.

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