It seems fair to say that biotech hasn’t been the hottest of fields for much of this year. Money continues to flow out of more high-risk corners of the market as investors seek safe havens. The Russell 2,000, for instance, which includes the small cap stocks from the larger Russell 3,000, has been flat as a pancake since February. And for a risky sector like biotech the results have been much the same, with the NASDAQ Biotechnology Index actually down about nine per cent since its February high and currently at about even for the year-to-date.
But investors can still find companies with lots of prospects in biotechnology, and here Cantech Letter has three of them, all with Buy ratings from analysts. In no particular order, we start with Antibe Therapeutics (Antibe Therapeutics Stock Quote, Charts, News, Analysts, Financials TSX:ATE), a clinical-stage company in the acute pain and inflammation space which has as its lead drug otenaproxesul, a H2S-releasing analog of the widely used naproxen NSAID (non-steroidal anti-inflammatory drug). Antibe is working with otenaproxesul as it has been shown in clinical trials to have limited gastrointestinal side effects in comparison to naproxen which can have significant GI impacts.
This August, the company put a clinical trial with otenaproxesul on hold due to subjects exhibiting higher than normal liver transaminase elevations, with Antibe now shifting its focus from chronic pain to shorter-term dosing in acute pain.
Antibe’s share price dropped hard after the announcement, but the company still shows promise, according to Echelon Capital Markets analyst Stefan Quenneville, who updated clients on the company in an October 14 report, saying that ATE presents an opportunity for investors with a high-risk tolerance, since the pivot to acute pain puts Antibe and otenaproxesul in a market with smaller potential but also one with a shorter clinical path.
“Given the Company’s pivot, we have made some adjustments to our model. While we are lowering our peak sales estimates, we are advancing our commercialization timeline by two years to C2025 (from C2027) and increasing our probability of success to 50 per cent (from 30 per cent) in our probability adjusted DCF (11 per cent discount rate), resulting in our new $3.00/shr target price (from $4.00/shr). We continue to view otenaproxesul as a potentially meaningful and differentiated pain drug (NSAID without cardiovascular or GI side effects) and we maintain our Speculative Buy rating for the company,” Quenneville wrote.
At the time of publication, Quenneville’s new $3.00 target represented a projected one-year return of 159 per cent.
Next up is NervGen Pharma (NervGen Pharma Stock Quote, Charts, News, Analysts, Financials TSXV:NGEN), a biopharmaceutical company with lead candidate NVG-291 which has shown positive preclinical functional data related to nervous system regeneration, with NervGen aiming NVG-291 at treating spinal cord injury, multiple sclerosis and Alzheimer’s disease.
Earlier this month, the company reported preliminary data from an ongoing Phase 1 trial, with iA Capital Markets analyst Chelsea Stellick reporting that the results show an excellent trajectory in the study’s first 25 subjects.
“The pharmacokinetic data from cohorts one through four show a more favourable profile in humans than in rodents, including a longer half-life (detectable up to 12 hours post-dose) alongside rapid distribution in the blood. These signals are very encouraging since this means NVG-291 is likely to have an even stronger effect in humans than it had in rodents, all else equal. Given the profound efficacy already seen in rodents, these early signals exceeded our expectations and are very promising for the prospect of bringing NVG-291 to humans,” Stellick wrote in an October 18 update.
Up ahead, Stellick pointed to the Phase 1 trial for NVG-291 finishing over the first half of 2022, with a Phase 1b/2 in Alzheimer’s dementia and spinal cord injury and a Phase 2 trial in multiple sclerosis also coming in 2022.
With the report, Stellick reiterated her “Speculative Buy” rating and $6.00 target price, which at press time represented a projected return of 156 per cent.
Lastly, we have Theratechnologies (Theratechnologies Stock Quote, Charts, News, Analysts, Financials TSX:TH), a hybrid specialty pharma and biotech company focused on HIV, with two products in the US, Trogarzo and Egrifta, the latter of which it is aiming to advance into a Phase 3 trial with a partner for the treatment of nonalcoholic steatohepatitis (NASH). As well, Theratechnologies has two oncology candidates one of which, TH1902, is currently in a Phase 1 trial for sortilin-positive cancers.
Theratechnologies recently reported fiscal third quarter earnings which analyst André Uddin said came in a little weaker than expected in terms of revenue, with weaker margins and a higher quarterly loss than forecasted. Uddin said finding a partner to run its Phase 3 trial will be key for TH going forward.
“We are confident in TH’s ability to strike a partnership for its NASH program given Egrifta’s promising profile on targeting NASH (see Page 3). TH has received interest from China for TH1902 and the SORT1+ platform – which we view as positive. We are reducing our Trogarzo sales estimate in Q4 and increasing R&D expenses estimates across the board,” Uddin wrote in an October 13 update.
With the report, Uddin reiterated his “Buy” rating and $8.25 target, which at press time represented a projected return of 84 per cent.