As the month of May kicked off, stocks got off to a rocky start. The market slumped in response to a first quarter profit miss from eCommerce giant Amazon (NASDAQ:AMZN) and its plan to put all second-quarter earnings towards its COVID-19 response, with all three of the major U.S. indexes landing in the red on the week’s final day of trading. Aside from healthcare stocks, many also came under pressure as tensions between the U.S. and China flared after the Trump administration stated that China will be held accountable for COVID-19.
May 1’s disappointing trading session came on the heels of the largest monthly surge for Wall Street in more than three decades. However, that’s not to say investors should hold off on all new additions to their portfolios. The investing pros note that it’s still possible to unmask the names poised to take off on an upward trajectory, you just have to know what to look for.
This is especially true of the healthcare space, which has managed to hold up significantly better than other industries. Advising careful due diligence, they recommend focusing on healthcare stocks the analyst community as a whole believes have healthy long-term growth prospects.
Once we knew what to watch out for, we used TipRanks’ database to pinpoint seven compelling healthcare stocks:
- Ascendis Pharma A/S (NASDAQ:ASND)
- Argenx SE (NASDAQ:ARGX)
- Amicus Therapeutics, Inc. (NASDAQ:FOLD)
- Iovance Biotherapeutics, Inc. (NASDAQ:IOVA)
- Natera, Inc. (NASDAQ:NTRA)
- United Therapeutics Corporation (NASDAQ:UTHR)
- Axsome Therapeutics Inc. (NASDAQ:AXSM)
Each of these healthcare stocks is backed by several analysts, enough to earn a “strong buy” consensus rating. Not to mention some pretty impressive upside potential is on the table. Let’s dive right in.
Ascendis Pharma (ASND)
The first of our healthcare stocks to buy is Ascendis Pharma. Using its cutting–edge TransCon technology, Ascendis optimizes the dosing capabilities of products that are already on the market. Following a recent Phase 2 data readout, several members of the Street are even more excited about this stock’s long-term growth prospects.
Writing for Oppenheimer, analyst Leland Gershell argues that the results clearly demonstrate TransCon PTH has the potential to be a “true replacement therapy in patients with hypoparathyroidism.” In the 21µg/day arm, which was the highest dose, nine out of 15 patients met each of the primary and secondary composite endpoints. All patients were able to eliminate the standard of care (SOC). Adding to the good news, there was a positive effect on renal calcium resorption.
Gershell added, “No severe or serious adverse events were recorded, nor was any hypocalcemia during titration off SOC. Hypercalcemia was observed in 2/15 (13%) in 21µg/day cohort w/o clinical sequelae. We would expect dose tailoring on an individual basis, as would occur in practice vs. trial’s fixed dosing, to be supportive to safety.”
Looking forward to the initiation of Phase 3 in the fourth quarter, Gershell sees a large market opportunity, with the worldwide target market coming in at 200,000 and at 70,000-112,000 for the U.S.
Taking all of this into consideration, Gershell decided to stay on the bulls’ side. Along with his “outperform” call, he also bumped up the price target to $219, implying 71% upside potential.
Out of nine total ratings, 100% were bullish, making ASND’s Street consensus a “strong buy.” See the ASND stock analysis.
Argenx SE (ARGX)
When it comes to Argenx, there is certainly some overhang.
Cowen analyst Yaron Werber points out that full year 2019 was solid for ARGX, but there’s more to the story. Several competing FcRn-targeting drugs in the MG space, including Immunovant’s IMVT-1401 and Momenta’s M281, have upcoming data readouts. These candidates appear to be well-tolerated and have previously shown upwards of 70-80%+ knockdown of IgG. However, the Cowen analyst believes ARGX’s lead candidate, efgartigimod, can go head-to-head with these other therapies.
“We believe that ARGX’s efgartigimod has a potentially best-in-class profile with a first mover advantage across several indications (MG, ITP, PV and CIDP) while offering both IV and SQ formulations. Efgartigimod is eying lucrative multi-billion dollar markets. Our peak $2.3 billion in sales is based on a peak 30% share in MG and ITP with a 75% probability of success. Approval in both segments offers attractive upside before even considering the potential in other indications,” Werber commented.
As autoimmune disorders like MG, ITP, PV and CIDP still have unmet needs because the current available options like steroids and immunosuppressants have poor tolerability and IVIg is expensive, inconvenient, and faces capacity constraints, favorable Phase 3 MG data in mid-2020 and the BLA filing in MG in Q4 2020 could drive substantial upside in 2020. To this end, Werber left an “outperform” rating and $191 price target on the stock. Should this target be met, a twelve-month gain of 31% could be in store.
Does the rest of the Street think ARGX can outperform in the long run? As it turns out, other analysts say yes. Six “buys” compared to no “holds” or “sells” assigned in the last three months add up to a “strong buy” consensus rating. At $194.36, the average price target puts the upside potential at 34%. See the ARGX stock analysis.
Amicus Therapeutics (FOLD)
Amicus Therapeutics specializes in developing better therapies to help patients suffering from ultra-orphan diseases, including lysosomal storage disorders (LSDs). As one of its lead programs has already been well received post-launch, one analyst believes the healthcare company’s future is only getting brighter.
Its oral pharmaco-chaperone drug, Galafold, for Fabry, generated hefty sales of $55.3 million in Q4 2019. Not only did this top-line number beat the Street’s $49.7 million call, but it also surpassed Cowen analyst Ritu Baral’s $50.5 million estimate.
Not to mention this result represents 13% quarter-over-quarter growth. Even though FOLD had a net loss of $91 million during the quarter and SG&A expense gained 9% quarter-over-quarter, it should be noted that this was in part caused by the expanded geographic scope of the launch of Galafold into Japan and the U.S.
Baral added, “FOLD projects YE20 Galafold sales of $250-$260 million that would represent 37-43% year-over-year growth. Projected growth assumes maturing uptake in the EU top 5 countries (market share changing from ERT-switch to ERT-naive) and continued rapid uptake in US and non-top 5 EU countries. FOLD expects to see commercial sales from Latin American countries in 2021 to further drive topline growth.”
To top it all off, GTx pipeline development is continuing. CLN6 follow-up and initial CLN3 data are both slated for the second half of 2020.
It should come as no surprise, then, that Baral kept an “outperform” call and $31 price target on the stock. This conveys her confidence in FOLD’s ability to soar 174% in the next year.
As for the rest of the Street, other analysts are in agreement. With three “buys” and one “hold,” the word on the Street is that the healthcare name is a “strong buy.” Based on the $21.17 average price target, shares could climb 87% higher in the next twelve months. See the FOLD stock analysis.
Iovance Biotherapeutics (IOVA)
Next up on this list of healthcare stocks to buy is Iovance Biotheraputics. With the goal of stomping out cancer, Iovance develops transformative immuno-oncology tumor-infiltrating lymphocytes (TIL) therapies that use the power of a patient’s own immune system.
After its collaborator, Moffitt Cancer Center, provided an update on the Phase 1 testing of TILs plus nivolumab in CKI-naïve metastatic non-small-cell lung carcinoma (NSCLC) patients, the stock is on Wall Street’s radar. In order to be eligible, patients needed to be anti-PD-1 naïve and at least one safely accessible metastasis from where TILs were isolated had to be present.
Looking at the data, the therapy was effective in 25% of patients, with two complete responses recorded. On top of this, the key analysis indicates that in order to spur a clinical response, TILs need to survive and circulate systematically.
Further explaining this, H.C. Wainwright’s Joseph Pantginis noted, “Importantly, the authors also demonstrated that neoantigen positive T cells represented 21% of total TIL clonotypes. Although TIL clonotype persistence declines with time in the blood of these patients, persistent and stable levels of infused T cells associated with higher tumor killing and response. Thus, we believe that methods to enrich for these TIL populations, such as Iovance’s next generation TILs could be critical to drive better clinical responses.”
As NSCLC is a notoriously difficult indication to address, Pantginis argues that the results should be interpreted as a major positive. With this in mind, he left a “buy” rating on IOVA. Along with his bullish call, the analyst lifted the price target from $36 to $48. This brings the upside potential to 50%.
With 100% Street support, or nine “buy” ratings set in recent months, the consensus is unanimous: IOVA is a “strong buy.” See the IOVA stock analysis.
At the core of Natera’s mission, it hopes its innovative technology will deliver highly accurate solutions for noninvasive prenatal testing (NIPT), genetic-carrier screening, (PGD/PGS) as well as miscarriage testing. With it handing out a preliminary Q1 beat, several analysts believe the sky’s the limit when it comes to this name among healthcare stocks.
According to the company’s management, Q1 revenue is expected to come in around $89-91 million, which would reflect 33-36% year-over-year growth. Additionally, even though investors have expressed concern regarding rising levels of competition, uptake for its mobile phlebotomy service, which allows patients to provide blood samples from the safety of their own home, has been solid.
Weighing in for Canaccord Genuity, analyst Max Masucci points out that during the COVID-19 pandemic, NTRA has actually been gaining market share. “NTRA’s core reproductive health business provides an essential service to pregnant women, and we continue to expect pregnancy-related doc visits to decline less than routine primary care visits over the coming months …We were positively surprised to see a major commercial payor grant temporary coverage to an incremental 20 million average risk pregnancies (for NIPT), which we view as an important step in the right direction,” he stated.
It also doesn’t hurt that the company has a pro-forma cash balance of about $650 million-plus thanks to its $250 million-plus convertible raise.
All of the above prompted Masucci to keep his “buy” rating and $46 price target as is. Given this target, the upside potential lands at 31%.
NTRA has received support from other Wall Street analysts as well. The stock has only “buy” ratings attached to it, three to be exact, and thus the analyst consensus is a “strong buy.” At $46.33, the average price target is slightly more aggressive than Masucci’s and implies 32% upside potential. See the NTRA stock analysis.
United Therapeutics (UTHR)
Pharmaceutical company United Therapeutics already has multiple therapies approved for the treatment of pulmonary arterial hypertension (PAH) and pediatric neuroblastoma. However, after a strong showing in its first quarter, the gains could still keep on coming for UTHR, making it another great option for healthcare stocks to buy.
During the most recent quarter, net revenue came in at $356.3 million, surpassing the $344.3 million consensus estimate. GAAP EPS also exceeded expectations, with the figure landing at $3.12 compared to the Street’s $2.74 call. The top and bottom-line beats were primarily driven by Remodulin’s resilience to generic versions of treprostinil, with the drug contributing $145.3 million in Q1 sales. Not to mention Orenitram saw 18% year-over-year revenue growth. Looking specifically at its cash position, UTHR rounded out the quarter with a healthy balance of $2.41 billion.
While some investors have sounded the alarm bells regarding COVID-19’s effect on sales, Wedbush analyst Liana Moussatos argues that the impact might not actually be so profound.
“Management commented that Q1 sales were not impacted by the COVID-19 pandemic, but observed a decrease in new prescriptions and new patient starts for treprostinil-based therapies (Remodulin, Tyvaso and Orenitram) in April 2020 primarily due to the inability of patients to visit the doctor’s office physically. Due to our view that COVID-19 is likely only to have a transient decrease in Q2 revenues, we remain comfortable with our revenue projections for 2020,” Moussatos explained.
On top of this, multiple near-term catalysts are fast-approaching, including the submission of an sNDA to expand Tyvaso labeling, a discussion with the FDA about potential indication expansion for Unituxin in relapsed/refractory neuroblastoma, and the launch of the pharmacy-filled version of Remodulin’s RemUnity system.
Based on all of the above, it’s no wonder Moussatos reiterated an “outperform” rating and $243 price target, which indicates 123% upside potential.
In general, other Wall Street analysts take a similar approach when it comes to UTHR and other healthcare stocks. Out of seven total analysts that have thrown an opinion into the mix recently, six were bullish, making the consensus rating a “strong buy.” See the UTHR stock analysis.
Axsome Therapeutics (AXSM)
And just like that, Axsome Therapeutics has another blockbuster opportunity, making it a great option out of the healthcare stocks out there.
The company, which develops therapies for patients suffering from central nervous system (CNS) disorders, announced on April 27 that AXS-05 had met the primary and secondary endpoints in the Phase 2b/3 ADVANCE-1 trial testing the drug in patients experiencing agitation related to Alzheimer’s disease (AD), the most common form of dementia. Compared to the placebo, AXS-05 was able to rapidly, substantially, and significantly improve agitation.
Commenting on the results, H.C. Wainwright analyst Raghuram Selvaraju noted, “We believe that regulators in multiple territories ought to view these data favorably, particularly in light of the rapid onset of action and robust treatment effect. Furthermore, we expect that any confirmatory trial in this indication would not need to include an active comparator arm.”
It should be noted that currently, no FDA-approved treatments are available for AD agitation. In addition, agitation is seen in up to 70% of AD sufferers and is associated with accelerated cognitive decline, earlier nursing home placement and increased mortality risk. Given the high unmet medical need, the candidate has been granted FDA Fast Track designation.
Thanks to this huge market opportunity, Selvaraju believes AXSM is well positioned for hefty gains. Along with his bullish call, he increased the price target to $210. This brings the upside potential to 133%.
The rest of the Street doesn’t beg to differ. With six “buys” compared to zero “holds” or “sells,” the consensus is unanimous: AXSM is a “strong buy.” While less aggressive than Selvaraju’s, the $142.80 average price target still leaves room for 58% upside potential. See the AXSM stock analysis.
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.