One after another, the IPOs just kept coming in 2019. This year has seen a wave of companies debut on the public market, with some making more graceful entrances than others.
While attention has zeroed in on well-known names like Uber and Beyond Meat, some of Wall Street’s pros point to several biotechs as the stars of the IPO show. For example, Turning Point Therapeutics, a biotech company developing small-molecule cancer treatments, filed its IPO back in April, selling 9.25 million shares at close to $18 each. As of December 2, shares are going for $54.73. Not too shabby. As a result, investor focus has locked in on biotech names that IPO’d in 2019.
Having said that, analysts remind investors to use discretion as not all new IPOs have what it takes to outperform. So how are investors supposed to separate the names poised to soar in the long-run from the flops?
We recommend turning to TipRanks’ Stock Screener. Using the tool, we pinpointed 3 biotech stocks the analysts believe are bound for greatness, all of which are Buy-rated.
Oyster Point Pharma (OYST)
Oyster Point is a clinical-stage biotech company focused on developing innovative treatments for ocular surface diseases. After its October 31 market introduction that offered 5 million shares of common stock at $16 per share, several analysts are betting on this name.
Cowen’s Ken Cacciatorre tells investors that his bullish thesis is based on the company’s lead candidate, OC-01. The drug is being developed as a nasal spray to treat dry eye disease, a condition that affects over 30 million people in the U.S. Thanks to the noteworthy efficacy and safety profile demonstrated in the Phase IIb ONSET-1 study, the FDA stated that the trial could serve as one of two pivotal studies needed for approval.
Cacciatorre argues that this indication bodes well for OYST: “We believe this underscores the de-risked profile for OC-01, as all doses met on both signs (Schirmer’s Score at week 4) and symptoms (Eye Dryness Score at week 3 and 4).” On top of this, the analyst adds that if the results from the Phase III ONSET-2 trial are favorable, the company could file the NDA in the second half of 2020 and potentially launch OC-01 in the U.S. in late 2021.
It’s also important to consider that there’s a huge available market, with the needs of patients largely unmet. Currently, the condition is treated with artificial tears or the only FDA-approved drugs, Restasis and Xiidra. Not only do the two drugs have tolerability issues, but also failure rates of more than 50%. As a result, Cacciatorre estimates that OC-01 is a $1 billion-plus peak opportunity.
All of this prompted the analyst to start OYST coverage with a Buy rating and set a $40 price target. This conveys his confidence in the biotech’s ability to climb 134% higher in the next twelve months. (To watch Cacciatorre’s track record, click here)
Similarly, the rest of the Street has high hopes for OYST. Based on 100% Street support in the last three months, the consensus is unanimous: the biotech is a Strong Buy. Not to mention the $34 average price target puts the upside potential at 97%. (See Oyster Point stock analysis on TipRanks)
Centogene stands out from the other names on our list as it takes real-world clinical and genetic data and transforms it into actionable insights that can be used by patients, physicians and pharmaceutical companies. The biotech began trading on November 7, with the IPO including 4 million shares with a $14.00 price tag, for total gross proceeds of $56 million. In less than a month, the biotech has found itself on some analysts’ radar thanks to its potential to address substantial unmet needs in rare disease diagnostics and therapeutics development.
Following the passage of orphan disease legislation in the U.S. and Europe, the biopharma space has been investing heavily in the rare disease drug market. It’s estimated that more than 350 million people worldwide are impacted by rare diseases, with orphan drug sales potentially increasing by double digits annually to reach $240 billion by 2024.
BTIG analyst Sung Ji Nam believes that CNTG is well-positioned to capitalize on this growing market, citing CNTG’s “unparalleled” data repository and biobank. “CNTG’s database is rigorously curated and ethnically diverse and the company has one of the most convenient and simplest patient sample collection strategies (dry blood spotbased) of which we are aware, enabling CNTG’s endeavor of comprehensively analyzing different biomaterials (genomic, proteomic, metabolomic),” he wrote in a note to clients.
To top it off, biopharma partnerships represent a huge opportunity for CNTG. “CNTG has the potential to add value to every phase of the biopharma drug discovery and development process as well as post-commercialization. CNTG has over 35 biopharma partners currently, and the recent Pfizer partnership announcement (Nov 13) further raises CNTG’s profile, in our view,” Nam explained.
Bearing this in mind, the five-star analyst told investors that he is siding with the bulls on this one. Along with a “buy” recommendation, his $18 price target brings the potential twelve-month gain to 47%. (To watch Nam’s track record, click here)
Looking at the consensus breakdown, it has been relatively quiet when it comes to other analyst activity. Out of 2 analyst ratings published in the last three months, both were bullish, making CNTG a Moderate Buy. Additionally, the $18 average price target indicates 43% upside potential. (See Centogene stock analysis on TipRanks)
RAPT Therapeutics (RAPT)
RAPT Therapeutics, an immunology-based biotech company specializing in treatments for oncology and inflammatory diseases, went public on the same day as OYST to the tune of a 3 million share offering. Since then, shares have soared 81% from the $12 IPO price.
Part of the excitement surrounding the company has been fueled by the opportunities for its CCR4 inhibitor programs, which exploit T cell homing as a way to treat a wide range of allergic inflammatory diseases and cancer. Its primary candidate, RPT193, has already progressed through a Phase 1a healthy volunteer study, which demonstrated a positive safety and PK/PD profile for the treatment of allergic inflammatory diseases. Wells Fargo analyst Jim Birchenough tells investors that he sees “peak revenue potential of $1.3 billion for RPT193 in the growing, multibillion dollar atopic dermatitis market.”
Adding to the good news, the company’s FLX475 candidate for the treatment of cancer also looks promising. Birchenough noted, “With a phase 1/2 study of FLX475 monotherapy and KEYTRUDA combination advancing from phase 1 in mixed tumor types toward phase 2 in eight cohorts of charged tumor types (including NSCLC, TNBC, HNSCC, and virally associated tumors), we see the program as providing additional upside potential going into 1H20 proof-of-concept data.”
To this end, the five-star analyst initiated coverage by publishing a bullish call and set the price target at $33. At this target, shares could surge 52% in the coming twelve months. (To watch Birchenough’s track record, click here)
To find other good ideas for biotech stocks trading at fair value or better, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.