The stock market’s January 2022 swoon has spared few sectors and health care has been one of the biggest underperformers. Biotech names have been especially hard hit as is often the case during risk-off mode. Less than three weeks into the new year, the Nasdaq Biotech Index is down 10% compared to the 6% decline in the broader Nasdaq Composite.
Biotech stocks are notoriously among the most volatile on the exchange which can be both a blessing and a curse. Hardest hit during market downturns, they can be the fastest to recover when a rebound unfolds.
Some investors like to embrace the volatility of biotech by taking things to the extreme, investing in small caps and penny stocks. These plays can amplify gains but also hold the potential for huge losses.
Moving up the capitalization spectrum is one way to mitigate risk when it comes to biotech investing. More mature companies that have commercialized products or deep pipelines typically carry less risk than upstart biotechs that lean on a single candidate.
These are three relatively established mid-cap biotechs that sell-side research firms say can at least double as 2022 progresses.
Why Do Analysts Think Denali Therapeutics is a Buy?
Denali Therapeutics (NASDAQ:DNLI) develops therapies for various neurodegenerative diseases. While it has yet to generate revenue from the sale of any products, it has one of the most extensive portfolios of therapeutic candidates.
There are five clinical-stage programs underway at Denali Therapeutics one of which is a high-profile program with Biogen for Parkinson’s disease. The company’s other programs include potential therapies for ALS, dementia, and Hunter syndrome. The pipeline also includes a pair of candidates for neurological diseases and inflammatory diseases in conjunction with Sanofi.
Aside from Denali’s diverse pipeline and partnerships with big-name biopharmaceutical companies, analysts favor the progress that has been made. It is involved in a phase II study of DNL-758 for patients with cutaneous lupus erythematosus (CLE). Programs for ALS and Hunter syndrome are also advancing well. Denali Therapeutics’ liquidity position is also in its favor as it has $1.4 billion in cash and no debt.
Earlier this month Morgan Stanley reiterated its buy rating on Denali and gave it a $91 price target. The rest of the Street is mostly bullish and some targets for the $35 stock extend beyond $100.
Is Apellis Pharmaceuticals Stock a Buy?
Apellis Pharmaceuticals (NASDAQ:APLS) is a biotech company focused on developing novel therapeutics for autoimmune and inflammatory diseases. Its lead drug is Empaveli, a therapy that targets the C3 protein to treat patients with a rare blood disorder called PNH. Last year Empaveli was approved by the FDA marking the company’s first FDA approval. The initial commercial response to the drug has been strong which bodes well for revenue generation in 2022. Empaveli is also being developed for other indications which could significantly expand the drug’s addressable market.
More positive news was announced late last year when Apellis received European Commission (EC) approval for Aspaveli, a separate treatment for patients with PNH. Expansion into Europe is also expected to contribute to sales growth in the quarters ahead. The consensus expectation for 2022 sales is approximately $130 million which could get upwardly revised as early sales data starts coming in.
After a strong finish to the year, Apellis has been dragged down with the rest of the biotech group in recent weeks. This has mobilized the Street to reiterate its bullish stance on the company. Goldman Sachs and Raymond James have supported the $39 stock since 2022 began and both have price targets north of $100.
What is the Upside for Iovance Biotherapeutics Stock?
Iovance Biotherapeutics (NASDAQ:IOVA) is among the most-liked mid-cap biotechs on the Street. In the past three months, eight sell-side analysts have called the roughly $15 stock a buy opportunity. On January 12th, JMP Securities expressed optimism that Iovance will recover from its recent slide and gave it a $32 price target suggesting the stock could double. Several other firms have targets that imply at least 100% upside.
T-cell-based immunotherapies for the treatment of cancer are the focus of Iovance’s clinical programs. The therapies are designed to infiltrate tumors and use the power of the patient’s immune system to target cancer cells. The company’s lead candidate is Iifileucel for the treatment of metastatic melanoma and metastatic cervical cancer. The drug candidate is being evaluated in two different studies and after a 2021 delay, Iovance is planning to seek FDA approval for a biologics license application (BLA) later this year. Iovance’s other programs include potential therapies for head and neck squamous cell carcinoma (HNSCC), non-small cell lung cancer (NSCLC), and leukemia.
Much is riding on the BLA for Iifileucel in 2022. If approved it would be a major boost to the stock, and if delayed would mark another disappointing setback. Analysts generally think this is a risk worth taking and that the stock can eventually trend towards $50 where it traded a year ago.
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