The stock markets are hovering around all-time highs with the S&P 500 up 19% year-to-date. These gains in the markets have encouraged a run of IPO activity, as companies move to go public and raise new capital in the rising stock environment.
A look at some numbers will quantify the IPO rush, and perhaps add some perspective into just how strong it is. By the end f July, there had been 250 IPOs priced this year, marking an increase of 191% over the same period of 2020 – and in fact, beating 2020’s total number of 218. In dollar terms, IPOs this year have raised over $89 billion, up 232% from last year. Clearly, this is a target-rich environment.
The solid momentum in IPO activity is attracting attention from Wall Street analysts, who are looking under the hoods of the newly public companies to find the ones that truly deserve investors’ money.
Using the TipRanks database, we identified two such stocks that have received overwhelmingly bullish praise from the Street, enough to earn a “Strong Buy” analyst consensus. Not to mention each offers up substantial upside potential, as some analysts see them surging over 100%.
TScan Therapeutics (TCRX)
The first stock we’ll look at here, TScan, is one of the many discovery-stage biopharma companies researching applications of T-cell immunotherapy. TScan takes a unique approach to the field, monitoring and studying cancer patients who have demonstrated ‘exceptional responses’ to immunotherapy in order to find out what differentiates them from other patients – and to use that knowledge to discover clinically relevant treatment targets and T-cell receptors (TCRs).
TScan is building a database – an immunobank – of clinically relevant data, and using it to select TCRs that show high levels of anti-tumor activity with low levels of side effects. The company has two research tracks, the leading liquid tumor program and a solid tumor program. The leading drug candidates, TSC-100 and TSC-101, are in the liquid tumor program, for hematologic malignancies, and the research track focuses on development of T cell receptor-engineered T cell therapies. The research has shown promise at the pre-clinical stage, and the company is working to develop a clinical trial paradigm.
The company’s solid tumor program is also pre-clinical, albeit at an earlier phase of development.
Like most early-stage biopharma researchers, TScan burns cash and has no current revenue sources. The company has spent much of 1H21 seeking out sources of capital. In January, TScan scored a major win, with the announcement of $100 million in Series C financing. The funding came mainly from venture capital firms.
Following up on that success, TScan in July of this year announced pricing of its IPO. The event saw 6,666,667 shares of common stock go up for sale on the market, at $15 each, with an additional 1 million shares on option for the underwriters. The TCRX ticker started trading on July 16, and the offering closed on July 20. The company raised $100 million in gross proceeds from the offering.
Covering this new stock for Jefferies, analyst Chris Howerton sees reason for optimism.
“‘100 and ‘101 (each targeting different patient subsets) are set to enter the clinic in early ’22 with initial results expected before YE’22. If successful, we see ‘100 and ‘101 as unlocking an unadjusted peak sales opportunity of >$2B in post-transplant relapse prevention, but more importantly, it will provide de-risking to CMC and feasibility to the true prize – TCR-T’s for solid tumors,” Howerton opined.
The analyst added, “While too early for us to value specific programs, we see tremendous potential for the solid tumor programs, and we especially like the non-viral/transposon-based delivery methodology and the ability to multiplex TCR-T therapeutics to enhance potency and durability of anti-cancer activity.”
To this end, Howerton puts a Buy rating on TCRX, and his $21 price target implies a 12-month upside potential of ~105%. (To watch Howerton’s track record, click here)
In its short time on the public markets, TScan has picked up three bullish analyst reviews, giving the stock a Strong Buy consensus rating. TCRX shares are selling for $10.25 after three weeks in the public eye, and their $21.50 average price target suggests they have ~110% upside for the coming year. (See TCRX stock analysis on TipRanks)
Erasca, Inc. (ERAS)
With this next stock, we’ll move from discovery-stage biotech to clinical-stage. Erasca is a precision oncology company working to develop new anti-cancer drugs. The company is following multiple strategies in its research, to discover, develop, and eventually commercialize new medication therapies for RAS and MPAK pathway cancers. Erasca has a pipeline of 9 separate drug candidates.
The lead candidate in the pipeline, EARS-007, is being studied as a treatment for various solid and liquid tumors, as well as non-small cell lung cancer. The drug has four separate tracks under investigation, with one (the tissue agnostic RAS/MPAK altered solid tumor track) entering a Phase 1b/2 clinical trial, the HERKULES-1 trial. The other indications for this drug candidate are the subjects of HERKULES 2 through 4, which are planned to start later this year.
In mid-July, Erasca held its IPO. The initial price was set at $16 per share, and with 18.75 million shares up for sale, Erasca aimed to raise $300 million in new funding. The event did better, and the stock closed its first day above $17. Erasca had raised gross funds of $345 million by the time the IPO closed on July 20.
Evercore’s 5-star analyst Josh Schimmer was impressed enough by Erasca’s approach to initiate his coverage of the stock with an Outperform (i.e. Buy) rating, and a $45 price target that implies a one-year upside of ~131%. (To watch Schimmer’s track record, click here)
“ERAS is serious about targeting an addressable market that measures in the hundreds of billions of dollars annually on a global basis. While that may sound absurdly high, it’s not unrealistic if we consider sales of checkpoint inhibitors ($23B market and growing) and AZN’s Tagrisso ($10B peak trajectory for EGFRm NSCLC alone). ERAS’ approach to inhibiting the #1 pathway in cancer could prove to be exceptionally successful.” Schimmer wrote.
Other analysts are on the same page. With 4 Buys and 1 Hold received over the past week, the word on the Street is that ERAS is a Strong Buy. Shares are trading for $19.65 and have an average price target of $30.20, which indicates ~54% upside for the year ahead. (See ERAS stock analysis on TipRanks)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
