Biotechs are on a roll this year.
The IBB, an ETF that tracks the sector’s biggest players, is up nearly 14% this month—its best monthly performance in more than 2 years—almost double the S&P 500’s year-to-date (YTD) performance of 7.7%.
But investing in biotechs can be tricky business as stocks can go from boom to bust in an instant and are heavily dependent on the successes of their drugs that are in clinical trials.
Brian Skorney, senior research analyst at Baird, believes there’s still value to be discovered in the space, and says that investors should look for companies with upcoming catalysts rather than buying the sector as a whole.
“Definitely people have more of a stock-specific outlook for 2019. I think there’s probably more skepticism on owning IBB than not,” Skorney said.
The following stocks are high risk/high reward names in the biotech space, and both offer possible triple-digit returns this year. Here’s what you need to know about these two stocks.
Aimmune Therapeutics (NASDAQ: AIMT)
I’m one of those unfortunate souls with a severe allergy to peanuts. So severe, in fact, I refer to peanuts as “tiny death nuggets.”
That’s where Aimmune Therapeutics (NASDAQ: AIMT) comes in. The company has an investigational immunotherapy product that looks like it has the potential to reduce severe allergic reactions to peanuts. AR101 is not a “one shot” immunotherapy, and patients will need to receive continual doses to maintain relief from their allergy.
AR101 is still in testing but has already been submitted to the FDA for approval. While that approval was slowed by the government shutdown, the approval process can now start moving forward again as the government is back open for business (at least temporarily).
If approved, myself and the other 1.7 million peanut allergy sufferers in this country may finally get relief from this sometimes life-threatening allergy.
The risk with Aimmune is that the company has zero revenue at this point, and is relying on approval of AR101 to remain viable. The company has a few other drugs in its pipeline, but none have yet entered clinical trials, and thus won’t see approvals any time soon.
Still, the AR101 clinical trials showed generally positive outcomes, which means the treatment has a decent shot at gaining approval.
I, for one, am optimistic that my “death nugget” days may soon be behind me.
The average analyst price target for AIMT is $50.56, suggesting possible upside of 115% over the next twelve months. Just last month, Wedbush rated the stock a Buy and set a price target of $80 – 240% higher than Thursday’s closing price.
Leap Therapeutics (NASDAQ: LPTX)
Leap Therapeutics (NASDAQ: LPTX) is in the cancer biotechnology space.
Its clinical-stage treatments include DKN-01, a monoclonal antibody targeting Dickkopf-related protein 1 (DKK1). The treatment is in phase I/II clinical trials with patients with esophagogastric and biliary tract cancers, and phase I clinical trials with patients with non-small cell lung cancer. The company also announced earlier this month an investigator-initiated study of DKN-01 as a mono therapy and in combination with docetaxel in patients with advanced prostate cancer.
“An important part of our DKN-01 development strategy is to target biomarker-selected patient populations,” said Cynthia Sirard, M.D., Vice President of Clinical Development at Leap. “In our esophagogastric cancer study, we have identified DKK1 levels measured by RNAScope as a potential predictor of response to DKN-01-based therapy.”
Its other pipeline treatment is TRX518. TRX518 is a monoclonal antibody treatment that is in early-stage trials targeting the glucocorticoid-induced tumor necrosis factor-related receptor in patients with solid tumors.
The company has a clinical trial collaboration agreement in place with Merck (NYSE: MRK) for its DKN-01 treatment in combination with Merck’s anti-PD-1 therapy, Keytruda, in patients with relapsed or refractory advanced esophagogastric cancers.
On Thursday, the company announced a common stock public offering to help fund new clinical trials for DKN-01 and TRX518, and good news coming from clinical trials for either treatment could send the stock soaring.
There’s a consensus Buy rating on LPTX and the average twelve month price target for the stock is $10.50, suggesting possible upside of 438.5%. Late last year, HC Wainwright set a price target of $13 – 567% above the current price.