Wall Street is placing huge bets on biotechnology and biopharmaceutical companies following the largest global healthcare crisis in modern history. As one of the fast-growing segments in the healthcare industry, participating companies have the potential to multiply their returns because the demand for effective treatments for many chronic and rare diseases is on the rise.
The size of the global biotechnology market is expected to expand at a CAGR of 15.8% over the next eight years. With institutional investors and retail investors betting on this industry, the iShares Nasdaq Biotechnology ETF (IBB) has gained 61% over the past year.
Against this backdrop, we believe Immunovant, Inc. (IMVT), Zogenix, Inc. (ZGNX), and Spectrum Pharmaceuticals, Inc. (SPPI) are well-positioned to capitalize on this trend.
Click here to checkout our Healthcare Sector Report for 2021
Immunovant, Inc. (IMVT)
Headquartered in New York IMVT is a clinical-stage biopharmaceutical company focused on developing treatments for patients with autoimmune diseases. The company is developing IMVT-1401, which is a novel, fully human monoclonal antibody that selectively binds to and inhibits the neonatal fragment crystallizable receptor. IMVT is a subsidiary of Roivant Sciences Ltd.
In February, IMVT announced a voluntary pause in its ongoing clinical trials for IMVT-1401 because it became aware of a physiological signal consisting of elevated total cholesterol and LDL levels in IMVT-1401-treated patients in ASCEND GO-2, a Phase 2b trial in Thyroid Eye Disease (TED). In January, Rita Jain, M.D. was appointed as the company’s Chief Medical Officer.
The company’s research and development expenses increased significantly for the quarter ended December 31, 2020, coming in at $21.09 million. However, this was due primarily to an $8.90 million increase in contract manufacturing costs and $1.40 million and $0.90 million increases in costs related to clinical studies and clinical research, respectively, due to an expansion of clinical trials.
Analysts expect the company’s EPS to increase 13.2% for the current quarter ending March 31, 2021 and 16.2% in fiscal 2021. IMVT has gained 83.2% over the past year and closed yesterday’s trading session at $17.17. Wall Street analysts expect the stock to hit $38.55 in the near term, which indicates a potential upside of 167%. Of 11 Wall Street analysts that have rated the stock, four rated it Strong Buy and six rated it Buy.
Zogenix, Inc. (ZGNX)
Founded in 2006, ZGNX is a pharmaceutical company that develops and commercializes central nervous system (CNS) therapies that address specific clinical needs for people living with orphan and other CNS disorders. Its primary area of therapeutic focus is epilepsy and related seizure disorders, and its lead products include ZX008, which is a low-dose fenfluramine for the treatment of seizures associated with Dravet syndrome, and Relday, a long-acting injectable formulation of risperidone used for the treatment of schizophrenia.
The company’s FINTEPLA oral solution became available in Germany in February. It is used for the treatment of seizures associated with Dravet syndrome in patients aged two years and older, and as an add-on therapy to existing anti-epileptic medications. In December, ZGNX collaborated with Tevard Biosciences, a privately held biotechnology company that pioneers tRNA-based gene therapies, to identify and develop novel tRNA-based gene therapies for Dravet syndrome and other genetic epilepsies.
ZGNX’s total revenues increased 336.2% year-over-year to $8.50 million for the fourth quarter ended December 31, 2020. This can be attributed primarily to the company’s product sales of FINTEPLA, which generated $8.07 million. Its collaboration revenue of $0.44 million was a result of its collaboration with Nippon Shinyaku Co., Ltd. for FINTEPLA in Dravet syndrome and LGS in Japan.
Analysts expect ZGNX’s EPS to grow 10.8% in fiscal 2021 and at a rate of 8.8% per annum over the next five years. Also, its consensus revenue estimate of $17.54 million for the quarter ending June 30, 2021 represents a 1599.6% rise year-over-year.
ZGNX has gained 5.9% over the past year and closed yesterday’s trading session at $20.39. It is expected to hit $48.80 in the near term, which indicates a potential upside of 132.9%. Of 11 Wall Street analysts that have rated the stock, seven rated it a Strong Buy or Buy.
Spectrum Pharmaceuticals, Inc. (SPPI)
SPPI is a leading biotechnology company focused on acquiring, developing, and commercializing drug products primarily in the hematology and oncology segment. It is mainly focused on developing ROLONTIS, which is being investigated for the treatment of chemotherapy-induced neutropenia, and POZIOTINIB, which is a novel irreversible tyrosine kinase inhibitor for non-small cell lung cancer tumors with various mutations.
SPPI announced on March 16that the pre-approval inspection at the ROLONTIS manufacturing site has been scheduled in May 2021 by the U.S. Food and Drug Administration (FDA). Also, the U.S. FDA granted Fast Track designation for poziotinib on March 11. It is used for the treatment of non-small cell lung cancer (NSCLC) in previously treated patients with HER2 exon 20 mutations. On December 14, 2020 the company announced the appointment of Nora Brennan to its Board of Directors.
The company ended its e fiscal 2020 third quarter (ended September 30, 2020) with cash, cash equivalents, and marketable securities of $198.30 million. SPPI made significant progress in its drug development programs during the quarter and strengthened its financial position.
Its EPS is expected to increase 17.1% for the quarter ended December 31, 2020 and 19.4% for the quarter ending March 31. SPPI has gained more than 53% over the past year. It closed yesterday’s trading session at $3.44 and Wall Street analysts expect the stock to hit $10.40 in the near term, which indicates a potential upside of 196.3%. Also, of the six Wall Street analysts that have rated the stock, four rated it a Strong Buy or Buy.
Click here to checkout our Healthcare Sector Report for 2021
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IMVT shares rose $0.21 (+1.29%) in after-hours trading Tuesday. Year-to-date, IMVT has declined -64.86%, versus a 4.18% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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