The stock market's January 2022 slump has spared few industries, and health care has been one of the worst performers. Biotechnology names have taken a beating, as they often do when the market is in risk-off mode. The Nasdaq Biotech Index is down 10% compared to the 6% drop in the broader Nasdaq Composite in 2022.
Biotech stocks are notorious for their volatility, which may be a blessing or a hindrance. When the market falls, they are frequently the most severely damaged companies and can recover quickly when the upturn begins.
Some people prefer to embrace the volatility of biotechnology by speculating in microcaps and penny stocks. These investments may enhance returns, but they can also amplify losses.
One approach to reduce risk when it comes to biotech investing is to climb the capitalization spectrum. Mature businesses with commercialized products or extensive pipelines are generally less risky than upstart biotechs that rely on a single candidate.
These are three mid-cap biotechnology firms that sell-side research companies think can at least double in value by 2023.
Denali Therapeutics (NASDAQ: DNLI)
Denali Therapeutics creates therapies for many neurodegenerative conditions. It has one of the most diverse portfolios of therapeutic candidates among companies, without having to sell any goods yet.
Denali Therapeutics has five clinical-stage programs underway, one of which is a high-profile program for Parkinson’s disease with Biogen . Other programs include potential therapies for ALS, dementia, and Hunter syndrome. In addition, there are two prospects for neurological and inflammatory diseases in collaboration with Sanofi.
Aside from Denali's strong pipeline and collaborations with big-name biopharmaceutical businesses, investors like the progress that has been made. DNL-758 is in Phase II testing for patients with cutaneous lupus erythematosus (CLE). The progress of ALS and Hunter syndrome programs has been excellent. The liquidity position of the stock is also in its favor, as it has $1.4 billion in cash and no debt.
Denali stock was given a $91 price target by Morgan Stanley earlier this month, after the firm reaffirmed its buy rating and raised the price target for the company's stock. The rest of the Street is largely bullish, with some targets for the $35 stock extending beyond $100.
Apellis Pharmaceuticals (NASDAQ: APLS)
Apellis Pharmaceuticals is a biotechnology firm that focuses on developing new drugs for autoimmune and inflammatory diseases. Empaveli, a medicine that targets the C3 protein to treat patients with a rare blood disease called PNH, is Apellis's main product. The FDA recently approved Empaveli as the company's first FDA approval. Empaveli's commercial success has been encouraging, and the drug is expected to generate a profit in 2022. Empaveli is being developed for additional applications, which could significantly increase the drug's addressable market.
PNH patients have another opportunity to fight the disease when Apellis announced late last year that its product Aspaveli had EC approval, allowing for additional treatment for people with PNH. The expansion into Europe is also expected to help boost sales in the quarters ahead. The consensus projection for 2022 sales is $130 million, which might be raised if early sales figures begin to flow in.
After a strong finish to the year, Apellis stock has taken a beating with the rest of the biotech sector recently. This has prompted investors to reaffirm their bullish outlook on the company. Since beginning in 2022, Goldman Sachs and Raymond James have backed the $39 stock, and both have price targets north of $100.
Iovance Biotherapeutics (NASDAQ: IOVA)
The Iovance Biotherapeutics stock is one of the most popular mid-cap biotechs on Wall Street. In the last three months, eight sell-side analysts have recommended buying the roughly $15 stock. On January 12th, JMP Securities predicted that Iovance would recover from its recent slump and gave the stock a $32 price objective, implying it might rise by two times. Several other firms have goals that suggest at least a 100% return on investment.
Iovance is developing T-cell-based immunotherapies for the treatment of cancer. The treatments are meant to enter tumors and utilize the patient's immune system's strength to target cancer cells. Iifileucel is the company's lead candidate for the treatment of metastatic melanoma and metastatic cervical cancer. The new drug candidate is now being tested in two studies, after a 2021 delay, and Iovance intends to request a biologics license application (BLA) from the FDA this year. Other therapies Iovance is developing include potential treatments for head and neck squamous cell carcinoma (HNSCC), non-small cell lung cancer (NSCLC), and leukaemia.
In 2022, the fate of Iifileucel is riding on the BLA. It would be a major boost to Iovance stock if it is authorized, but if it is delayed, it will be another disappointing setback. Analysts generally feel that this is a worthwhile gamble and that the stock may very well move towards $50, where it was trading a year ago.