With the coronavirus outbreak rapidly dragging the market into the red one day and the green the next, a cloud of uncertainty is hanging over Wall Street. When it comes to what the economic recovery will look like, experts are divided.
Against this backdrop, investors have been wary to say the least. That being said, analysts remind investors not to panic, suggesting that the first step should be to take a step back and focus on the bigger picture.
This means making an investment decision based on multiple factors rather than just a single metric like fundamentals. Sure, this strategy makes sense, but getting the job done isn’t always so straightforward, especially given the market’s current volatility. That’s where TipRanks comes into play.
The platform offers a Best Stocks to Buy tool that scans the Street for only the stocks with a top Smart Score. This score is a composite ranking based on eight key metrics that reflect a stock’s long-term prospects, with 10 being the highest possible score. These seven stocks to buy in the healthcare sector have all earned a “Perfect 10” Smart Score. Each is also well-loved by the analyst community and boasts substantial upside potential. Here’s the scoop.
“Perfect 10” Healthcare Stocks: ChemoCentryx (CCXI)
ChemoCentryx (NASDAQ:CCXI) specializes in developing oral therapies for treating autoimmune diseases, inflammatory disorders and cancer. That being said, its primary focus is on orphan and rare diseases. While shares have dipped year-to-date much like the broader market, several analysts believe its reduced price tag represents an attractive entry point.
H.C. Wainwright’s Edward White wrote in a recent note to clients that the company’s avacopan drug is the driving force behind his bullish thesis. The candidate was designed as an oral C5a receptor inhibitor that can be used as a treatment for several diseases. Now progressing through a Phase 3 ADVOCATE trial evaluating avacopan in patients with ANCA-associated vasculitis (AAV), the company can now proceed with the NDA filing, which should be completed by mid-2020.
As 40,000-75,000 patients in the U.S. and about 50,000-100,000 patients in Europe suffer from the condition, there is a significant market should the therapy ultimately receive approval. Based on the available clinical data, White sees a high likelihood that the candidate will in fact get the go-ahead from the FDA. According to the analyst, avacopan demonstrated superior results when compared to the current standard of care.
This prompted White to comment, “We anticipate the approval and launch of avacopan in 2021, with avacopan sales of $29 million that year. We estimate avacopan sales of $148 million in 2022.” With the large potential opportunity for avacopan’s use in treating hidradenitis suppurativa (HS), it’s no wonder he is optimistic.
To this end, White reiterated his “Buy” rating as well as a $60 price target. Should the target be met, shares could be in for a 74% twelve–month gain.
Out on Wall Street, it appears that other analysts are on the same page. With 100% Street support, the message is clear: CCXI is a “Strong Buy.” At $62.25, the average price target puts upside potential at 81%.
Novavax (NVAX)
Novavax (NASDAQ:NVAX) has undoubtedly been grabbing headlines, with investor attention reaching a pinnacle after it entered the race to find a coronavirus vaccine. As a result, so far in 2020, shares have soared 74% as the broader market faces off against severe volatility.
To advance the development of a vaccine candidate, the Coalition for Epidemic Preparedness Innovations (CEPI) awarded the company a $4 million grant. It should be noted that NVAX also reached an agreement with Emergent BioSolutions, in which Emergent will manufacture and produce the candidate.
The analyst community is standing firmly behind the healthcare name as it has already developed vaccines for other coronaviruses. “Among the many vaccine platform approaches, NVAX has the deepest expertise in developing vaccines against previous coronaviruses, SARS and MERS, including demonstrating strong immunogenicity and 100% protection against virus challenges in preclinical studies,” B.Riley FBR analyst Mayank Mamtani commented.
The analyst added that NVAX’s approach gives it the edge over other players working to produce an effective vaccine, noting, “Genetic immunization approaches on the basis of DNA and mRNA-based vaccines, particularly the latter, deployed in front-runner vaccine candidate from Moderna, seem viable in theory; but they still remain largely untested, with larger-scale patient exposure yet to occur in Phase 1-plus trials.”
It should come as no surprise, then, that Mamtani kept both his “Buy” rating and $15 price target as is. At this target, a twelve-month gain of 117% could be in the cards.
Turning now to the rest of the Street, other analysts believe that NVAX’s future is bright. Given that four “Buy” ratings have been set in recent weeks, and no “Hold” or “Sell” ratings, the word on the Street is that the stock is a Strong Buy. A return of 121% could be lining investors’ pockets if the share price reaches the $15.25 average price target in the next twelve months.
Arcturus Therapeutics (ARCT)
Using its proprietary technology, Arcturus Therapeutics (NASDAQ:ARCT) is developing safe and effective DNA and RNA medicines. Contrary to the broader market, this healthcare name has actually managed to notch year-to-date gains, 12% to be exact.
Like Novavax, ARCT has initiated a coronavirus vaccine program as part of a fully funded collaboration with the National University of Singapore (NUS) medical school. The vaccine will take advantage of the company’s STARR technology (self-replicating RNA) and LUNAR (non-viral, lipid-based delivery system) platforms as a way to generate proteins within the body.
Writing for Brookline Capital Markets, analyst Kumaraguru Raja points out that based on pre-clinical data, even at a lower dose, the STARR platform was 30 times more efficient that other mRNA vaccines. He added, “The efficiency of the STARR platform will allow ARCT to produce a vaccine response at a much lower dose. Arcturus has manufacturing process to produce multiple large GMP batches of pure OTC RNA, which will allow to treat a larger population compared to traditional mRNA vaccines.”
Adding to the good news, the company has submitted an investigational new drug (IND) application with the FDA for its ARCT-810 candidate in Ornithine transcarbamylase deficiency (OTCD), an inherited urea cycle disorder. According to Raja, this could drive significant upside for ARCT as the manufactured batches have already met the release criteria that would allow it to be used in humans.
Based on all of the above, Raja remains bullish on the healthcare company. Along with a “Buy” rating, the analyst bumped up the price target from $25 to $32. This new target brings the upside potential to a whopping 162%.
Kadmon Holdings (KDMN)
Kadmon Holdings (NYSE:KDMN) is a biopharma company that could potentially deliver innovative therapies that can be used as treatments in immune and fibrotic diseases as well as in immuno-oncology. While the market sell-off has weighed on shares, Nomura analyst Christopher Marai is standing firmly in KDMN’s corner.
Marai argues that the company’s recent pre-new drug application meeting with the FDA should be seen as a major step forward. The meeting was related to its KD025 candidate, which is progressing through a Pivotal study in patients with chronic graft-versus-host disease (cGVHD), a complication that can occur after hematopoietic cell transplantation (HCT) that causes multi-organ inflammation and fibrosis.
As investors have expressed significant concern that the coronavirus outbreak would result in non-essential FDA meetings being delayed, this development makes Marai optimistic about KDMN’s prospects. The analyst points to concern about FDA meetings being pushed back as being the source of the weakness in KDMN shares, in addition the broader market’s plunge.
Given the recent good news, Marai sees the company’s long-term growth narrative as being strong. As a result, he maintained his bullish call and $10 price target. Should this target be met, shares could be in for a 283% twelve-month jump.
As for other Wall Street analysts? They wholeheartedly agree with Marai. 3 out of 3 analysts that have published a recent review see the stock as a “Buy,” making the Street consensus a “Strong Buy.” Not to mention the $14.33 average price target means that KDMN could skyrocket 449% in the next year.
Nevro (NVRO)
Medical device company Nevro Corporation (NYSE:NVRO) is best known for designing an evidence-based treatment for chronic pain of the trunk and limbs, HF10. Following its fourth quarter earnings release, the analyst community thinks NVRO is primed to make waves within the spinal cord stimulation (SCS) space.
The solid print featured revenue of $114.2 million that landed in line with its pre-announcement from early January. In addition, management’s outlook for full year 2020 revenue also remained the same at between $435 million — $440 million, with the company expected to give this figure a boost as we move through the year.
Omnia, Nevro’s modular waveform SCS device, presents some opportunities longer term as well. In terms of this product, Morgan Stanley analyst David Lewis believes that the company is “going on offense”.
On top of this, at the NANS conference, the analyst tells investors he wasn’t surprised that the PDN results were “strong”, with the focus now being placed on the commercial opportunity, which he thinks can exceed $100 million in five years.
Taking all of this into consideration, Lewis is optimistic going forward. The four-star analyst not only reiterated his Buy recommendation but also lifted the price target from $125 to $142. At this new target, a 62% premium could be in store for investors that decide to pull the trigger.
With six “Buys” compared to just two “Holds” received in the last three months, the verdict is in: NVRO is a “Strong Buy”. The average price target of $148.43 leaves room for shares to move 70% higher in the coming year.
Thermo Fisher (TMO)
The next healthcare name on our list has been grabbing plenty of headlines recently. Thermo Fisher Scientific Inc. (NYSE:TMO), one of the top players serving the healthcare and scientific industries, has stated that it plans to produce 5 million coronavirus test kits by April. On the heels of this news, some members of the Street are taking a bullish approach when it comes to TMO.
Thermo Fisher counts itself as one of only two test producers to receive emergency use authorization (EUA) from the FDA for its Applied Biosystems 7500 Fast Dx Real-time PCR diagnostic instrument. While the product hasn’t received FDA approval yet, the EUA designation allows it to be used in the diagnosis of the virus.
However, TMO’s story hasn’t been completely headwind free. Analyst David Toung, from Argus Research, points out that the company reported mixed fourth quarter results, which showed growth on the top line slowed. Nonetheless, the addition of client service centers in international markets, upcoming product launches as well as the expansion of production capacity could drive significant growth for the company, in the analyst’s opinion. As a result, he cites TMO as being a winner in the long run.
In line with this bullish take, Toung reiterated his Buy rating. To top it all off, the five-star analyst increased his price target by $30, with the new $370 target indicating shares could surge 32% in the next twelve months.
Out of 10 analysts that have thrown their hats into the mix with an opinion, 8 were bullish, making the consensus rating a “Strong Buy.” A 28% return could be doled out based on the average price target of $358.33.
Aurinia Pharmaceuticals (AUPH)
With the goal of meeting patients’ unmet medical needs, Aurinia Pharmaceuticals Inc. (NASDAQ:AUPH) is developing and commercializing innovative therapies. Its investigational candidate, voclosporin, could potentially be used as a treatment in lupus nephritis (LN) and focal segmental glomerularsclerosis (FSGS). The topical formulation of the drug is being evaluated as a treatment for dry eye syndrome (DES).
After it released its financial results for the fourth quarter and an update on its plans for 2020, Cantor Fitzgerald analyst Alethia Young believes the company is moving in the right direction. She points out that after it released favorable AURORA data in early December, AUPH is on track to file an NDA by mid-2020, with potential approval in early 2021.
“Although we get the most questions on AUPH in the context of potential M&A, we think that the launch could be faster than expectations and that the drug has blockbuster potential. The launch will be a thesis that plays out more over 2021, but we think that as investors do their work on the market in 2020 that it will lead to upside over the year. Also, there are two catalysts remaining in 2H 2020 for dry eye and FSGS that get limited credit at the current valuation,” Young stated.
With the analyst seeing “fundamental value in shares”, it’s no wonder Young left an Overweight rating on the stock. In addition, she updated the price target, lifting it from $30 to $32, which suggests 174% upside potential.
What does the rest of the Street have to say? Similarly, other analysts have high hopes. A “Strong Buy” consensus rating breaks down into only “Buy” ratings, six to be precise. Given the $26 average price target, shares could soar 123% in the next twelve months.
TipRanks offers investors the latest insight into eight different sectors by tracking the activity of over 5,000 Wall Street analysts. As of this writing, Maya Sasson did not hold a position in any of the aforementioned securities.
