The Biotech Sector Nears an Inflection Point; Analysts Offer 3 Stocks to Consider

Mirroring the markets’ overall trend, the biotech sector has not gotten off to a good start in 2022, as evidenced by the Nasdaq Biotechnology Index (NBI) tilting 12% into the red year-to-date.

However, according to Yaron Werber, biotech analyst at investment firm Cowen, that is not necessarily indicative of how the rest of the year will pan out.

In fact, taking the Cowen Annual Health Care Conference in late February/early March (this year’s took place between March 7-9) as a “time point” that can be used to forecast annual performance, the findings paint an upbeat picture.

“A negative start followed by positive performance during the Cowen HC conference (matching the current set up in 2022) has been associated with positive performance for the remainder of the year in 3 of 3 instances over the last 22 years (2003, 2009, 2020),” the 5-star analyst said. “This provides a reason to be optimistic that sentiment may be shifting in the sector.”

So, it’s time to look at some promising names operating in the biotech space. We delved into the TipRanks database and zeroed in on three such stocks. All offer a bullish profile; rated Strong Buys by the analyst consensus and projected to bring home some serious gains over the coming months. Let’s see what makes them such appealing picks right now.

Altimmune (ALT)

We’ll first take a look at Altimmune, a clinical-stage biopharma working on novel peptide-based therapeutics indicated as therapies for liver diseases and obesity. Altimmune’s lead candidate is ALT-801 (Pemvidutide), a distinctive peptide-based dual GLP-1/glucagon receptor agonist which is undergoing testing for the treatment of obesity, non-alcoholic fatty liver disease (NAFLD) and non-alcoholic steatohepatitis (NASH).

Obesity is a common cause of NASH, and ALT-801 will try to address it. If approved, ALT-801 could be something of a game-changing medicine in obesity and NASH treatment – both are substantial unmet medical needs – by helping to lower body weight and comorbidities.

Earlier this year, the FDA gave the all-clear for the Investigational New Drug (IND) application for its Phase 2 clinical trial of pemvidutide for obesity. The company still expects to initiate the study this quarter. An interim analysis is planned to assess changes in body weight following 24 weeks of treatment, with an expected readout in 4Q22.

The readout will form part of what JMP analyst Jonathan Wolleben calls a “data-rich year.” Before that Q4 readout, Q3 should see the release of key 12-week data from the Phase 1b NAFLD study, and Wolleben has high hopes regarding the outcome.

“New data coming in 3Q22 from a Phase 1b in NAFLD patients could continue to support a best-in-class profile for pemvidutide,” wrote the analyst. “We expect the 12-week NAFLD data could replicate the unprecedented liver fat reductions observed already with best-in-class weight loss to boot. We also expect more data will assuage some investor concerns over the single ALT elevation observed in the prior Phase 1. To that end, ALT expects to have safety data from >200 subjects treated with pemvi by 4Q.”

Overall, the analyst summed up, “The pemvidutide data to date are quite compelling, in our view… We continue to recommend ALT shares and point to multiple catalysts in 2022, which we expect could provide a boost to shares in the near term…”

Accordingly, Wolleben rates ALT shares an Outperform (i.e. Buy), while his $24 price target shows room for growth of a hefty 257% over the coming year. (To watch Wolleben’s track record, click here)

The rest of the Street is in full agreement. Based on Buys only – 6, in total – the stock boasts a Strong Buy consensus rating. At $25, the average target is just above Wolleben’s and set to generate returns of 272% in the year ahead. (See ALT stock forecast on TipRanks)

Adicet Bio (ACET)

The next biotech stock we’ll look at is Adicet, a company targeting the development of engineered T cell-based therapies against cancer. To do so, the clinical-stage biotech makes use of a differentiated class of T lymphocytes called gamma delta (γδ) T cells.

Given gamma delta T cells’ unique properties – they can home in on and eliminate tumor cells while skipping over normal, healthy cells – the treatments have the potential to produce longer-lasting therapeutic activity while also having a better safety profile, making them very appealing for the treatment of solid malignancies.

Most of Adicet’s pipeline is still in the early stages but leading the way and further along in development is ADI-001, indicated for the treatment of non-Hodgkin’s lymphoma.

In December, an interim data readout from the ongoing Phase 1 trial was highly promising and showed 2 complete responses (CR) and one partial response (PR). The company expects to present additional interim data during 1H22.

In another important development, in January, Regeneron opted into the company’s solid tumors program by deciding to license the exclusive, worldwide rights to ADI-002, an allogeneic gamma delta CAR T cell therapy targeting Glypican-3. As a result, the company received an exercise fee of $20 million.

Based on the above, Adicet has caught the eye of Guggenheim analyst Michael Schmidt, who thinks the company’s prospective treatments could represent an “intriguing new class of therapeutics within the adoptive cell therapy space,” while the share price looks appealing too.

“In light of the key de-risking clinical data presented in December, we continue to think ACET trades at an extremely attractive valuation,” the 5-star analyst said. “ACET is well financed with cash runway into 2023, and we continue to believe ACET shares are set up well to outperform the XBI longer term as the company successfully advances development of existing product candidates towards additional clinical proof-of-concept and via general validation of γδ T cell technology driven by increasing industry interest in the technology.”

Unsurprisingly, Schmidt puts a Buy rating on ACET shares, backed by a $22 price target. The implication for investors? Upside of ~102% from current levels. (To watch Schmidt’s track record, click here)

This is another name with the Street’s full support. All 6 recent analyst reviews are positive, naturally culminating in a Strong Buy consensus rating. The forecast calls for one-year gains of ~87%, considering the average target clocks in at $29.67. (See Adicet stock forecast on TipRanks)

Seres Therapeutics (MCRB)

Last but not least is Seres Therapeutics, a clinical stage company hoping to impact patients’ lives with what it terms “revolutionary microbiome therapeutics.”

Research has shown that gut microbiome has a big role to play in the health of the human body. By creating metabolites that interact with other microorganisms and the host, bacteria, a significant component of the gut microbiome, can influence various bodily functions including metabolism, and immune and inflammatory responses.

The company’s pipeline includes two therapies indicted to treat ulcerative colitis (UC) – SER-287 and SER-301 – and another – SER-155 – which is currently in a Phase 1b study assessing the effects of the drug in lowering the incidence of infections and graft-versus-host disease (GvHD) in immunocompromised patients.

But the candidate making the biggest splash so far is SER-109, indicated for the treatment of recurrent C. difficile infection (CDI). In the Phase 3 clinical trial, the treatment met the primary endpoint of showing an advantage over the placebo in reducing CDI recurrence. The company is currently getting the BLA ready for filing with the FDA, which should take place around mid-2022.

H.C. Wainwright’s Vernon Bernardino is confident the treatment is destined for success. He writes, “We believe there is substantial commercial opportunity for SER-109 given that there are approximately 170,000 cases of rCDI and CDI results in over 20,000 deaths annually in the U.S. Additionally, with the cost to treat a patient with rCDI approximately $34,000 in annual direct healthcare expenses, which does not include substantial indirect costs, rCDI creates a significant burden to the healthcare system. Overall, we anticipate approval of SER-109 in 1Q23 given two months for acceptance of the Biologics Licensing Application (BLA) and a six-month priority review.”

Accordingly, Bernardino rates MCRB a Buy, and has a $25 price target for the shares. Should the target be met, investors are looking at returns of a strong 239%. (To watch Bernardino’s track record, click here)

2 other analysts have reviewed Seres’ prospects recently and both have reached the same positive conclusion, making the consensus view on this name a Strong Buy. The average price target currently comes in at $18, suggesting shares could climb ~144% higher in the year ahead. (See MCRB stock forecast on TipRanks)

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Disclaimer: The opinions 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.