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The new trading year is upon us, and with the holidays slowly slipping into the rear-view mirror it’s time to focus on new stocks ideas for what could prove to be a very interesting year. With 2017 providing the best performance since 2013, it’s probably unlikely we repeat the massive gains from the past 12 months, but investors that choose to get aggressive right out of the chute could have some big gains on the books early.
We screened our 24/7 Wall St. research database for hot biotech ideas and found four companies that are offering big upside for aggressive accounts. All are rated Buy and have the potential to provide some early 2018 alpha.
Investors looking to a small cap play could be very interested in this company. Allena Pharmaceuticals Inc. (NASDAQ: ALNA) is focused on developing and commercializing non-systemic oral protein therapeutics to treat metabolic and orphan diseases, with a particular focus on nephrologic and urologic conditions.
The company’s lead product candidate, ALLN-177, is in an ongoing Phase 2 clinical trial and is being developed for the chronic management of hyperoxaluria and kidney stones. It is an orally administered, recombinant oxalate-degrading enzyme. ALLN-177 targets oxalate in the gastrointestinal tract to reduce the burden of both dietary and endogenously produced oxalate.
ALLN-177 also has the potential to decrease the oxalate available systemically for deposition as calcium oxalate crystals or stones in the kidneys, as well as to reduce the incidence of calcium oxalate related complications.
Jefferies analysts had this say about the drug:
ALLN-‘177 has completed Phase 2 for enteric hyperoxaluria, demonstrating both safety and meaningful effect. The company has an upcoming meeting with the FDA (late 2018 or early 2018) to go over the Phase 3 efficacy endpoint and the procedure for a BLA filing, which we believe could be a catalyst for shares. We expect this to lead to the start of a Phase 3 study in the first quarter of 2018. We see blockbuster potential for ALLN-177 and model $624 million in peak-adjusted sales.
The Jefferies price objective for the stock is $22, which compares with the Wall Street consensus target price of $24.67. The stock closed trading most recently at $10.06.
This biotech story has stayed out front on Wall Street for years. Intercept Pharmaceuticals Inc. (NASDAQ: ICPT) is a biopharmaceutical company focused on the development of treatment for chronic liver disease using its expertise in bile acid chemistry.
The lead product candidate, obeticholic acid (OCA), is approved for the treatment of primary biliary cirrhosis (PBC) and in Phase 3 trials for the larger nonalcoholic steatohepatitis (NASH), a common but often “silent” liver disease.
The Jefferies team had this to say about the prospects for the company going forward:
There have been safety concerns around the Primary Biliary Cholangitis (PBC) franchise, but we don’t believe the drug will be removed from the market and we believe PBC is at least a $300 million indication, which suggests that the stock gets little credit for NASH. NASH could be $1 billion to $2 billion in sales and the market cap of the company as a whole is only $1.5B. Discussions with management suggest that a label revision could come by early 2018 and if changes aren’t that bad, such an event could help remove the overhang. Interim NASH analysis comes in the first half of 2019.
Jefferies has put a stunning $135 price target, while the consensus target was last seen at $132.47. The stock closed last week at $58.42.
La Jolla Pharmaceuticals
This biotech company has been mentioned recently as a possible takeover candidate. La Jolla Pharmaceuticals (NASDAQ: LJPC) is a biopharmaceutical company focused on the discovery, development and commercialization of innovative therapies intended to significantly improve outcomes in patients suffering from life-threatening diseases.
The company’s LJPC-501 is its formulation of angiotensin II for the potential treatment of catecholamine-resistant hypotension (CRH). It has initiated a Phase 3 trial of LJPC-501 for the treatment of CRH, called the Angiotensin II for the Treatment of High-Output Shock 3 (ATHOS) Phase 3 trial. LJPC-401 is its formulation of synthetic human hepcidin for the potential treatment of conditions characterized by iron overload, such as hereditary hemochromatosis, beta thalassemia, sickle cell disease and myelodysplastic syndrome.
A recent FDA approval is a huge plus, and a SunTrust Robinson Humphrey research report had this to say:
The company provided a corporate update on Giapreza (a novel formulation of angiotensin II), which received FDA approval 2 months ahead of schedule for the treatment of septic or other distributive shock. Given Giapreza’s broader than expected label, and the high levels of awareness among healthcare providers for a new drug in a setting with significant unmet needs, we believe the Street is likely underestimating the market opportunity, which we now estimate at ~$700 million in the U.S.
The $57 SunTrust price target was recently raised to a staggering $65. The consensus figure is $51.67, and the shares most recently closed trading at $32.18 apiece.
This stock was hit hard near the end of 2017 and is offering investors a great entry point. Portola Pharmaceuticals Inc. (NASDAQ: PTLA) is focused on the development and commercialization of therapeutics in the areas of thrombosis, other hematologic disorders and inflammation for patients having limited or no approved treatment options.
The company’s two lead programs, Betrixaban and Andexanet alfa, address unmet medical needs in the area of thrombosis, or blood clots. Its third product candidate is Cerdulatinib. The company’s Syk is a mediator of immune response in various types of immune cells.
A product delay caused the selling, and Oppenheimer analysts weighed in with this:
Portola shares sold off after the company disclosed a three-month delay to the AndexXa PDUFA. We believe this decline is unwarranted based on our view that the company plans to launch two new drugs in 2018, each with sales potential exceeding $1B at peak by our estimates. We see the three-month delay to AndexXa (Portolas antidote for Factor Xa inhibitors when patients experience episodes of acute bleeding) as essentially immaterial to our outlook. We update our model to reflect a US launch of AndexXa in the second quarter of 2018 versus the prior first quarter estimate which results in small updates to our revenue and earnings estimates. We view the weakness in the shares as a buying opportunity.
Oppenheimer has set a $60 price target for the shares, and the posted consensus target is $57.29. The stock was last seen trading at $48.68 a share.
These four biotech stocks have big upside potential and make good sense for aggressive accounts looking for new 2018 ideas. While only suitable for very high risk-tolerance accounts, the stocks have big alpha potential.