When stocks hit bottom, investors should take note. Stock prices fall for a reason, but those reasons don’t always mean that the stock is unsound. In fact, some fundamentally strong equities can fall to rock bottom prices – and when that happens, it’s a buying opportunity.
Wall Street’s analysts are frequently on the alert for these cases, as they generally offer investors some of the best upside potentials in the market.
Using TipRanks’ database, we pinpointed two stocks whose price has fallen low – but in these cases, the analysts see the low price as a gateway. These are Buy-rated stocks, with an upside of 90% or better for the year ahead. Let’s take a closer look.
Global Blood Therapeutics (GBT)
We will start with Global Blood Therapeutics, a clinical-stage biopharma company that specializes in therapies for the treatment of sickle cell disease (SCD) — a hereditary disorder of the red blood cells. The condition is most often found in sub-Saharan African populations. SCD is a serious, chronic condition, associated with ongoing pain, life-threatening complications, and reduced life expectancy. The disease can be managed, but not cured.
The company’s main product, voxelotor, is available in tablet form under the brand name Oxbryta for SCD patients over age 12. Voxelotor is an orally dosed tablet, and the first FDA-approved treatment that directly inhibits the abnormal formation of hemoglobin in the blood, thus preventing the eponymous ‘sickle cells.’ GBT is currently pursuing several additional clinical studies of voxelotor, including for pediatric patients in various age groups.
Along with the ongoing voxelotor studies, GBT is pursing several drug candidates at earlier stages of the development pipeline. Chief among these is inclacumab, a drug designed to treat pain crises associated with SCD. The company is on track to begin a Phase 3 pivotal study on the safety and efficacy of inclacumab this year.
Also this year, GBT plans to initiate clinical studies of its drug candidate GBT021601. This development program is still at an early stage, and the study will be for proof-of-concept of this HbS polymerization inhibitor. The study is planned for later this year.
During the first quarter of 2021, GBT reported 950 new prescriptions of voxelotor. This number, and the drug’s total sales, were down from Q4, mainly due to the COVID-19 prevalence during Q1. Year-over-year, however, voxelotor sales increased by 177%, to $39 million. The drug received a Promising Innovative Medicine designation in the UK in mid-June.
No one is doubting the fact that Global Blood stock has had a rough going, especially during the Corona period. We’re talking about a 50% fall over the past 12 months. However, Oppenheimer analyst Mark Breidenbach is optimistic about the commercialization potential of voxelotor, and about the company’s pipeline.
“Given mounting evidence of Oxbryta’s positive impact, we are not surprised that the drug continues to attract special regulatory designations… We continue to view Oxbryta as an important step forward for SCD therapeutics, and we see GBT’s stock as strong candidate for post-COVID-19 recovery,” Breidenbach noted.
The analyst added, “While investors fixate on sales, GBT continues advancing a pipeline of therapies that could potentially complement the activity of Oxbryta.”
To this end, Breidenbach rates GBT shares an Outperform (i.e. Buy), and his $92 price target implies an impressive ~180% upside potential for the coming year. (To watch Breidenbach’s track record, click here)
Overall, GBT has 8 Buy-side ratings given in recent weeks. These are partially balanced by 5 Holds, making the analyst consensus view a Moderate Buy. GBT shares are trading at $32.81, and have a ~142% upside potential based on the average price target of $79.55. (See GBT stock analysis on TipRanks)
Mersana Therapeutics (MRSN)
The second stock we’re looking at is another clinical-stage biotech. Mersana is developing a family of proprietary antibody drug conjugates (ADCs) for cancer treatment. ADCs are highly targeted, combining monoclonal antibodies that attack specific antigens on tumor cell surfaces with potent anti-cancer drugs. In effect, the ADC acts as a platform to increase the anti-cancer drug load per dose. They also have the advantage of greater tolerability for patients.
Mersana has an active pipeline, with 8 agents currently under development — most are in early stages of research. Upifitamab rilsodotin (UpRi, or XMT-1536) has entered Phase 1 testing, with two studies initiated. The first, UPLIFT, started in 1Q21 to evaluate safety and efficacy of UpRi for patients diagnosed with platinum-resistant ovarian cancer. Enrollment is ongoing, and the company expects to have up to 180 patients in the study.
The second clinical trial for UpRi is a study of the drug against NSCLC adenocarcinoma, or non-small cell lung cancer. This Phase 1 study in an expansion phase, in which the company looks to enroll 40 patients. Interim data from the study is planned for release in 2H21.
In addition to these trials, Mersana is planning the UPGRADE study, to be initiated in 3Q21. This Phase 1 study will look at UpRi in combination with other anti-cancer agents, as a treatment for ovarian cancer. The study will begin in combination with platinum.
However, data from earlier this year on XMT-1536 pushed MRSN shares down sharply. In January, results from an earlier Phase 1 study showed an objective response rate in 47 patients of 28%. This was lower than the 35% ORR achieved in an earlier test involving 20 patients.
One analyst, however, thinks this new, lower stock price could offer new investors an opportunity to get into MRSN on the cheap. BTIG analyst Thomas Shrader rates the stock a Buy and his $32 price target suggests the stock has room for significant growth – on the order of 140% for the next 12 months. (To watch Shrader’s track record, click here)
“We like Mersana’s strategy to get monotherapy approval in the late-line OC setting (Uplift study initiated) and to subsequently explore earlier lines in combination with other agents. All these approaches are made possible by XMT-1536’s uniquely benign safety profile that allows tolerable chemo combinations. Overall, the Upgrade trial provides multiple shots on goal where Mersana plans to add multiple cohorts to evaluate XMT-1536 in combination with other therapies like Pt, Avastin, PARPi, orIO-agents. The P1 trial will initially start (in 3Q21) with a single cohort to determine MTD and safety of UpRi,” Shrader opined.
Overall, MRSN shares get a Moderate Buy rating from the analyst consensus on Wall Street. The stock has 6 recent reviews, breaking down to 4 Buys and 2 Holds. The average price target of $25.83 implies a one-year upside of 94% from the current share price of $13.29. (See MRSN stock analysis on TipRanks)
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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.
