5 ‘Strong Buy’ Biotechs That Can Double in 2018

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According to top analysts on the Street, these five “Strong Buy” biotech stocks are primed for outsized growth in the next 12 months.

Biotechs often present intriguing, and potentially lucrative, investment opportunities. Share prices can explode on positive trial results or key regulatory approvals. However, buyers beware: These rewards can disappear just as quickly if critical data disappoints. To minimize this risk, we specifically searched for stocks with a high degree of confidence from Wall Street’s top analysts.

In this case, we used the popular Trending Stocks tool to filter for best-rated stocks in the last week, regardless of market capitalization. The best part about this tool is that it clearly displays the upside potential from the current share price to the average analyst price target.

So we crunched the data and pinpointed these five compelling biotech stocks that are trending right now. All five stocks share a bullish Strong Buy analyst consensus rating. Note that this is based only on analyst ratings from the last three months.

With this in mind, let’s delve deeper into why the Street is so bullish on these stocks right now:

Strong Buy Biotech: TG Therapeutics (TGTX)

Strong Buy Biotech: TherapeuticsMD (TXMD)

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TG Therapeutics, Inc. (NASDAQ:TGTX) is focused on the development of novel treatments for B-cell malignancies and autoimmune diseases. Following strong Q4 results, five-star HC Wainwright analyst Edward White ramped up his price target from $33 to $38 (130% upside potential) on March 8.

His reasoning for the valuation is a bit complex, but ultimately it is based on the success and potential revenue of the company’s two main drugs ublituximab and umbralisib. Both are currently in Phase 3 clinical development. White explains: “We use the net present value of our revenue forecast through 2026, apply a 55% probability of success (POS) for ublituximab in CLL (Chronic Lymphocytic Leukemia), a 45% POS for umbralisib in CLL, and a 25% POS for both ublituximab and umbralisib in NHL (Non-Hodgkin Lymphoma), to arrive at our $38 price target.”

Bear in mind that so far White has struck gold with his TGTX recommendations. Across his 20 ratings on the stock he scored a 90% success rate and 44.4% average return. Meanwhile B.Riley FBR’s Madhu Kumar selects TGTX as an Out the Gate 2018 Pick, due to his “reasonable confidence in success in the Phase III UNITY-CLL trial, with interim data expected in 2Q18.”

In the last three months, four analysts have published buy ratings on TGTX. No hold or sell ratings here. And with an average analyst price target of $27.50, on average analysts are predicting 67% upside from the current share price.

Strong Buy Biotech: TherapeuticsMD (TXMD)

Strong Buy Biotech: TherapeuticsMD (TXMD)

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Innovative women’s healthcare company, TherapeuticsMD, Inc. (NYSE:TXMD), is launching important therapies for menopause-associated conditions. The company has just scored a big regulatory win. On March 8, the FDA announced that it is accepting an NDA (new drug application) for TX-001HR without noting any ‘potential review issues.’ Now the key date to keep an eye on is Oct. 28, 2018, when the FDA will either approve or reject the application.

“We view the revenue opportunity for TX-001 (hot flushes of menopause) to be several times larger than that for TX-004 and believe prevailing compounding regulations and compounder willingness to prescribe branded drugs could benefit TXMD” states top Cantor Fitzgerald analyst William Tanner. He sees the stock spiking a whopping 400% to hit $28 from the current share price of just $5.50.

In the meantime, TXMD’s other pipeline product, TX-004, has its approval date on May 29. This is a critical barometer for the success of TX-001 according to Tanner. He says: “we view the importance of the FDA’s action around that date to be of Brobdingnagian proportion.” This is because any response short of approval will lead to stock selling.

Bear in mind, the stock has unanimous support from the Street. In the last three months five analysts have published buy ratings on TXMD. Their average price target of $15.50 works out at 190% upside from the current share price of just $5.35. 

Strong Buy Biotech: Clearside Biomedical (CLSD)

Strong Buy Biotech: Clearside Biomedical (CLSD)

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Clearside Biomedical, Inc. (NASDAQ:CLSD) develops first-in-class drug therapies to treat blinding eye diseases. The stock is already up by a massive 80% year-to-date. Shares surged from just above $6 at the end of February to over $14 at the beginning of March. The catalyst: positive results in a late-stage trial to improve vision in patients with back of the eye swelling – otherwise known as macular edema.

The company revealed that 47% of patients administered the suprachoroidal CLS-TA treatment, could see at least 15 letters, compared to just 16% for patients with the placebo. CLSD now plans to file a marketing application with the FDA in Q4.

But don’t worry it’s not too late to profit from the stock’s meteoric rise. Top Wedbush analyst Liana Moussatos has just ramped up her price target to $29 on the news. This indicates further upside potential of 137%. She believes the results further validate CLSD’s micro-injection technology.

Moussatos commented, “In addition to several positive Phase 2 trials in ME-NIU, ME-RVO and DME, the PEACHTREE trial results represent the first clinical success at the Phase 3 level. Vision gain from suprachoroidal CLS-TA was observed as early as 30 days and maintained throughout the 6-month study. Due to the strength of the Phase 3 results, we consider clinical risk for the pipeline to be reduced.”

Overall, CLSD boasts six back-to-back buy ratings. Analysts (on average) see the stock soaring 80% to hit $22.80 in the coming months.

Strong Buy Biotech: Ocular Therapeutix (OCUL)

Strong Buy Biotech: Ocular Therapeutix (OCUL)

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Why have one eye drug company when you can have two?! Ocular Therapeutix, Inc.(NASDAQ:OCUL) has a clear goal: to pioneer a new era of drug delivery in ophthalmology. OCUL is currently trading at a bargain price of just $6.37. However, analysts are projecting big upside potential of 115% in the coming months. The company has received three buy ratings in the last three months.

Right now, OCUL has 1 approved product (ReSure Sealant for cataract incision closure) and 6 pipeline products. The big hitter here is Dextenza for the treatment of post-surgery eye pain and inflammation. Although the FDA rejected the drug’s first new drug application (NDA), everything is now on track for resubmission in the first half of 2018. The company has worked closely with the FDA to resolve all the issues. Luckily for OCUL, the FDA’s comments have not required any substantial change in its manufacturing or regulatory plans.

On this basis, five-star BTIG analyst Dane Leone sees Dextenza obtaining US regulatory approval by the end of 2018. The upshot is potential market entry for the drug as early as 2019. And from a financial perspective, the company raised $37 million additional capital in January, which provides a cash runway well into 2019.

Strong Buy Biotech: Flex Pharma (FLKS)

Strong Buy Biotech: Flex Pharma (FLKS)

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Last but not least comes ‘Strong Buy’ stock Flex Pharma, Inc. (NASDAQ:FLKS). Flex develops treatments for cramps and spasms associated with severe neurological diseases including ALS, MS and CMT (Charcot–Marie–Tooth disease).

Top HC Wainwright analyst Andrew Fein has just reiterated his Flex buy-rating with a very bullish $40 price target. Given that the stock is currently trading at just $5, this indicates huge upside potential of over 680%. He is confident in the ‘mechanistic rational’ of the company’s spasm reduction FLX-787 therapy.

“Catalysts on deck in MS, ALS, and CMT may provide near-term inflection points” according to Fein. Prepare for the read-out data from FLX-787’s exploratory Phase 2 spasticity study in multiple sclerosis to hit later this month. Later down the line, in early 2019, investors are looking to results from two Phase 2 trials in patients with ALS and CMT.

“All these activities in the pipeline may provide near-term inflection points, and signal to us that the company is making solid strides, and is committed, to transitioning into a pharmaceutical company from a consumer company” cheered Fein on March 8.

Flex boasts four recent buy ratings with just 1 analyst sticking to the sidelines. The $17.50 average analyst price target is over 200% from the current share price.

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ETF Traders Are Giving You These 3 High-Yield Stocks at a Discount

For investors who own individual dividend paying stock, it has become difficult to see why share prices move as they do. You probably know the feeling of having one of your stocks make a big move —usually down—and you cannot see any reason for the stock price action. Much of the blame for wild stock swings can be laid at the feet of exchange traded funds and the traders who short-term trade ETFs.

An ETF owns shares of stock to match the components of a specific stock index. For example, the SPDR S&P 500 ETF (NYSE: SPY) owns the 500 stocks in the same proportion as tracked by the Standard & Poor’s 500 stock index. The financial products industry has gone nuts with the development of new indexes to carve up the market into sectors and ETFs to track them. Currently there are over 2,000 ETFs listed in the U.S. The majority —78% of assets—of ETFs are based on stock market indexes. Those assets total over $2.4 trillion. ETF trading has become a very big part of what goes on in the stock markets.

There are two ways ETF action can affect the share values of individual stocks. The most obvious and easy to discern is when the weighting of a stock in an index is changed. One high yield example is Energy Transfer Partners LP (NYSE: ETP), a large cap master limited partnership, commonly abbreviated as MLP. In April 2017 ETP completed a merger with Sunoco Logistics Partners LP, another MLP that was a large component of MLP indexes. Because of the merger, ETFs and index funds tracking MLP indexes were forced to sell significant portions of their ETP holdings to bring the size of the positions down to match the index weightings. This merger was the start of a year long decline in the ETP unit value. Later in 2017, Alerian, the provider of the most popular MLP tracking indexes, changed its methodology to cap Alerian MLP Index constituents to a 10% weight. At that time, ETP’s weight was much higher than 10% in the index, so index tracking funds were again forced to sell ETP units, regardless of investment merit. These forced sales of ETP are the source of much of the 25% value decline over the past year. The company’s fundamentals have been steadily improving, but you could not tell by the market price. ETP currently yields 12.5%.

Related: 3 Growth ETFs for High Yield and Diversification

A subtler effect of the ETF boom is that trading of these funds leads to lack of discrimination between the financial results and business prospects. Stocks get lumped together into the ETFs that track specific market sectors. It is tough to figure out whether stock share prices and ETF trading are a chicken and egg dilemma, but it is becoming clearer that increases in ETF trading are tightening correlations, or the tendency for individual stocks and sectors to move up or down in lock step, regardless of a company’s fundamentals. While ETFs account for about 8% of the U.S. stock market value, ETFs are the source of more than 25% of the trading volume. Market observation clearly shows that share prices are greatly affected by short term sector switching by traders. The iShares Mortgage Real Estate ETF (NYSE: REM) provides a couple of examples. Most of the 30 or so stocks in this ETF own leveraged portfolios of residential mortgage backed securities, MBS in industry parlance. This business model is a dangerous game of lending long and borrowing short. This is a group of companies whose finances can be destroyed by a quick change in the yield curve. I recommend against owning any residential MBS focused REITs.

In contrast, the third and fourth heavily weighted stocks in REM are solid companies with business operations that are sustainable through market cycles. In contrast to the rest of the REM portfolio stocks, these two will do even better when short term rates rise. Starwood Property Trust, Inc. (NYSE: STWD) and New Residential Investment Corp (NYSE: NRZ) are very attractive stocks with share prices that have trouble escaping from the trading in REM. STWD currently yields 9% and NRZ is over 11%.

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Source: Investors Alley