The market hates biotechs right now, but some in the sector could bounce back in 2019.
Both of the following stocks have been beaten down recently with one down -38% year-to-date, and the other down nearly -40% in the last month.
However, both have promising drug candidates in their pipelines, and positive news could send share prices rocketing higher.
Here’s what you need to know about these two stocks.
TG Therapeutics (NASDAQ: TGTX)
TG Therapeutics (NASDAQ: TGTX) took a punch to the gut in September and hasn’t yet recovered, though analysts still think the stock has future potential.
So what happened? On September 25, shares of TGTX tumbled -34% after the company announced that it would no longer consider an accelerated pathway to approval for a combination drug therapy currently in clinical trials to treat leukemia.
Prior to that announcement, TGTX’s management had been saying there was a possibility of filling early for the treatment—a cocktail of ublituximab and umbralisib (U2) used in combination to treat patients with chronic lymphocytic leukemia (CLL)—based on the assumption that the combo therapy would produce compelling overall response rates early in the trials. But independent monitors of the trial were unable to conduct an interim analysis of the overall response rate because the data proved to be “not sufficiently mature,” and thus the overall response rate won’t win over FDA regulators if the company filed early.
On the upside, this crucial study isn’t an outright failure and the treatment still has a shot at becoming a big growth driver for TGTX when it makes it to market.
But on the downside, while CLL is the type of leukemia most commonly diagnosed in adults, it isn’t common enough that a new treatment would deliver blockbuster sales. Not only that, but the treatment—once approved—will be up against a treatment for the disease that AbbVie (NYSE: ABBV) is already seeing great success with.
Still, TGTX has been seriously beaten down this year and is currently down nearly -38% year-to-date, and any positive news is likely to send the stock soaring.
All of the analysts currently covering the stock rate TGTX a Buy. Their average price target for the stock is $21.50, indicating possible upside of 330% over the next twelve months.
Madrigal Pharmaceuticals (NASDAQ: MDGL)
Madrigal Pharmaceuticals (NASDAQ: MDGL) might be a better bet than TGTX.
Both Madrigal and Viking Pharmaceuticals (NASDAQ: VKTX) are developing treatments for the liver disease nonalcoholic steatohepatitis (NASH), a condition that effects 20 million patients nationwide and currently has no FDA-approved treatments.
Madrigal shares peaked after its primary candidate, MGL-3196, were shown to reduce liver fat in patients with NASH by 42% on average. However, those gains were pretty much wiped out after Viking released surprising results for its TRB agonist, VK809, a treatment that is a few steps behind Madrigal’s MGL-3196 treatment in the development timeline. VK2809 led to a reduction of liver fat of 59.7%, making Madrigal’s results loose their luster.
However, Viking’s study was far smaller with just 11 patients, and the therapy was tested on patients with nonalcoholic fatty liver disease (NAFLD), a precursor to NASH where patients have high levels of fat in their livers, but haven’t yet exhibited the more serious inflammatory symptoms of NASH.
Madrigal’s study was far larger and used patients with NASH who had livers that had already started to see damage from the disease. At 36-weeks, biopsies showed that patients’ chances of achieving NASH resolution had jumped 450% compared to a placebo group. That’s huge for Madrigal because the FDA has shown a willingness to review a drug that helps patients see resolution of the disease over insisting on longer-term studies that determine survival outcomes.
MGL-3196 is farther along in the development timeline and is likely to beat Viking’s VK2809 treatment to market. Goldman Sachs (NYSE: GS) analyst Salveen Richter says that MGL-3196 could generate peak annual sales of $6 billion once approved, and also sees the drug as a possible best-in-class treatment for NASH considering its proven efficacy and safety.
Analysts’ average twelve-month price target for MDGL is $262.63, suggesting possible upside of 142.45%. On Wednesday, HC Wainwright reiterated its Buy rating on the stock and set their price target at $313 – 188.96% above Thursday’s closing price.