The biotech industry, like most segments of the market, experienced a good run in the first half of the year. Recently, however, sector performance has improved and this has helped the NASDAQ Biotechnology Index (NBI) outperform the NASDAQ (Up 13% over the past 3 months vs. the NASDAQ’s 3%).
Oppenheimer’s biotech team believes there is a simple explanation for this: “We believe much of the recent outperformance has been driven by SMID caps, many of which have risen dramatically in recent months… We note a number of successful results from key clin. tests in this group [Alnylam Pharma, Caribou Biosciences, Cincor Pharma, amongst others].” Additionally, “The increasing number of high-profile M&A announcements may be reviving interest among specialists and generalists.”
This leads Oppenheimer to state that the skies look “a little brighter” for the biotech industry in 2 hours. In fact, Oppenheimer analysts expect two names to follow in their peers’ footsteps by releasing successful test results soon, which could help push them forward.
We ran both tickers through the TipRanks platform to see what they had in mind the rest of the way for them. It seems Oppenheimer analysts aren’t the only ones showing confidence. Both are rated as strong buys by the analyst consensus with plenty of potential upside in store. So, let’s get into the details.
Madrigal Pharmaceuticals (MDGL)
The first Oppenheimer pick we’ll look at is Madrigal Pharmaceuticals, a clinical-stage biopharma focused on finding new treatments for fatty liver disease. More specifically, the company seeks to discover a sustainable treatment for NASH (Non-Alcoholic Steatohepatitis). This is a more advanced form of non-alcoholic fatty liver disease (NAFLD).
It is thought that approximately 20% of adults worldwide are affected by NAFLD and 30% of adults in the US. 20% of this population has NASH. Since there are currently no FDA-approved NASH-specific drugs available, there will likely be ample reward for whoever brings a viable solution to market first.
Madrigal’s lead product candidate is resmetirom (MGL-3196), a selective liver-directed thyroid hormone receptor beta agonist currently in Phase 3 clinical trials, indicated for the treatment of NASH. Therefore, the drug could potentially become the first drug to receive approval for this disease.
In June, the company presented data at the European Association for the Study of the Liver’s International Liver Congress (EASL 2022) where Madrigal announced detailed results from the double-blind/placebo-controlled Phase 3 MAESTRO-NAFLD-1 trial.
Oppenheimer analyst Jay Olson notes that the results were unequivocally positive, highlighting the fact that resmetirom led to “favorable changes on Fibroscan and MRE where the greatest improvements were seen in the most advanced patients.” In fact, the analyst believes the results set the stage for an upcoming data reading.
“We believe the Ph3 MAESTRO-NAFLD-1 results provide risk-preventing support in the Ph3 MAESTRO-NASH biopsy study in patients with NASH (N≈2,000), which is ongoing with interim results expected in 4Q12 that could potentially support the Subpart H filing for expedited approval,” the analyst explained. “Previous Ph2 data showed that reduced hepatic fat on MRI-PDFF translates into NASH resolution and improvement in fibrosis.”
What does all this mean for investors? While Olson believes negative results could send the stock down ~80%, positive top results from the study could see shares more than double.
Olson is obviously confident Madrigal will deliver the goods. Supporting the analyst’s Outperform (i.e. Buy) rating is a $170 price target. That number leaves room for a 12-month gain of 162%. (To follow Olson’s history, Click here)
It’s not like other Street analysts are shy about predicting big things for this name. With 9 buys and 1 hold received in the last three months, the consensus is that MDGL is a strong buy. While less than Olson’s forecast, the average price target of $149.44 still shows significant upside potential of 130%. (See MDGL stock forecast on TipRanks)
Milestone Pharmaceuticals (FOG)
Let’s now take a look at Milestone Pharmaceuticals, another biotech but with an entirely different mission. The company aims to find a cure for arrhythmias and other heart conditions.
Milestone has put all its eggs into the development of etripamil, a self-administered nasal spray indicated as a treatment for patients with paroxysmal supraventricular tachycardia (PSVT) and atrial fibrillation (AFib).
The drug is currently in a Phase 2 proof-of-concept study, where it is being evaluated for the acute treatment of AFib with rapid ventricular rate (RVR). But more importantly now, it is the most advanced program for which there is an upcoming catalyst.
Etripamil is being tested in the Phase 3 RAPID trial to treat paroxysmal supraventricular tachycardia (PSVT) – a condition in which abnormal, electrical ‘wiring’ of the heart results in an unpredictable and repetitive high-speed heart rate. The condition affects the lives of an estimated 1.6 million people in the US, and finding a solution would not only be an important development, but also a way to reduce the burden and cost of healthcare.
Milestone expects to report topline data from the study in mid-2H22, and heading into the reading, Oppenheimer’s Leland Gershell likes the “risk reward” here.
“Success of the primary endpoint (time to episode termination within the first 30 minutes) should meet registration requirements and enable an NDA filing in 2023,” the analyst noted. “We believe etripamil represents an important therapeutic advance, as well as a means to reduce healthcare burden and costs, and is poised to generate industry-leading net sales of $500 million in PSVT alone. A Phase 2 study in atrial fibrillation with rapid ventricular rate has been initiated and could pave the way for a key label extension opportunity.”
It’s no surprise, then, that Gershell rates Milestone an Outperform (i.e. Buy) along with a $16 price target. The implications for investors? Potential upside of ~84% from current levels. (To follow Gershell’s history, Click here)
It’s clear that Wall Street likes this name. MIST recently collected 3 other analyst reviews and all are positive, giving the stock a strong buy consensus. Going by the average target of $14.50, a year from now, these shares will be 66% more valuable than they are today. (See MIST Stock Prediction on TipRanks)
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Disclaimer: The views expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.