Three months ago, I said that 2020 would go down as the Year of Biotech.
While the market has since been thrown for a loop that nobody could have predicted at the start of the year, my confidence in the biotech industry hasn’t shaken a bit. If anything, it might be even stronger.
The massive upside potential in the biotech sector is why I named Aimmune Therapeutics (NASDAQ:AIMT) stock as my pick in the Best Stocks for 2020 contest. It’s a leading biopharmaceutical company that focuses specifically on the unmet needs of people who suffer from food allergies.
Aimmune’s story is a cool one. If you missed my original recommendation back in December, you should check it out now.
AIMT Stock Starts the Year Strong
AIMT stock kicked off the year on a strong foot, climbing 10.5% in the first few weeks of January. And in early February, the company marked a major milestone as its lead drug candidate Palforzia was approved by the U.S. Food and Drug Administration.
Palforzia is the first approved treatment for patients with peanut allergies, the second most common food allergy in children in the United States that, unfortunately, has been on the rise. In fact, the number of children with peanut allergies has nearly doubled in the last decade. This makes for a huge total addressable market.
As this pharmaceutical breakthrough sees robust adoption, Aimmune should see increasingly visible commercial traction this year. In fact, I suspect Palforzia has a great chance to become a blockbuster drug — one that exceeds more than $1 billion in sales annually.
The peak sales opportunity ranges between $1 billion and $3 billion … just for peanut allergies.
According to Reportbuyer, Aimmune could have 67% of the peanut allergy market by 2027, equal to $3 billion. That’s a big number for a company that has yet to generate any revenue and has a current market value of under $1 billion.
Overcoming New Obstacles
I had expected the huge news of the FDA approval to send this stock to new highs. But unfortunately that wasn’t the case. In fact, the exact opposite has occurred.
At the close on Friday, March 27, Aimmune’s stock had taken a 62% haircut from its Jan. 16 high. Part of that has to do with fears surrounding the novel coronavirus. Widespread selling has affected every corner of the market.
Plus, as people are confined to their homes and the full attention of the medical community has turned to the fast-spreading virus, peanut allergies no longer appear quite as dire.
But severe food allergies can be fatal if not treated properly. In fact, more than 600 allergists have already become certified to prescribe the therapy as of mid-March.
The main delay in Palforzia’s rollout is that it requires a six-month treatment process — and most people are not looking to undertake something like that in the current environment.
While at times it may feel like things will never get back to normal, we know that they will eventually. When that time comes, I expect there to be an increased focus on healthcare. And Aimmune should be a huge beneficiary of that.
Another positive for Aimmune is that DBV Technologies (NASDAQ:DBVT) recently saw its stock crash. Why? The FDA raised questions regarding its application for a peanut allergy drug called Viaskin Peanut — which could have been a competitor to Palforzia.
Aimmune’s Best Stocks Potential Hasn’t Changed
Aimmune Therapeutics is currently the only company to have received FDA approval for a peanut allergy treatment, and I expect it will remain the only player in this space for the foreseeable future.
Even though Palforzia’s launch has been slowed by the coronavirus pandemic, the long-term outlook remains extremely bullish. By 2024, Aimmune is forecast to bring in earnings of $6.37 per share — up significantly from losses today. If the stock can trade at a reasonable 20 times earnings, it would be sitting up near the $130 level. And that’s nearly a 10-bagger from current prices.
Nobody could have predicted what the coronavirus has done to the stock market and our way of life in general a few months ago. And nobody could have guessed that it would have negatively impacted a peanut allergy company by such a degree. But it did.
However, we have to keep in mind that the value of AIMT stock and Aimmune’s therapies have not decreased by 50% in the last few months. And the huge market for a peanut allergy treatment certainly isn’t shrinking — if anything, it continues to grow.
The only thing that has changed is the stock price, and all it’s doing is creating an even better buying opportunity for long-term investors.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA) and +1,044% in Tesla (TSLA), just to name a few. Click here to see what Matt has up his sleeve now. Matt does not directly own the aforementioned securities.