Leading newsletter writers’ 2021 Top Picks of the Biotechs

For their 40th year anniversary, the MoneyShow editorial team “surveyed the nation’s leading newsletter advisors and investment experts asking for their favorite stocks for the year ahead. This year’s report—Top Picks 2021—features over 100 investment ideas for the new year”.

 

There were eleven Biotechs among the MoneyShow 2021 Top Picks. As you will see, Vaxart (VXRT) was one of our top picks in 2020, although not for 2021.

 

Company and Stock snapshot

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Stock performance

https://finviz.com/screener.ashx?v=141&t=AVXL,CLDX,ARWR,BLI,VXRT,ESPR,NMTR,MNKD,REGN,PGEN,PROG&o=ticker

 

In alphabetical order, here are the picks, which you may find sufficiently interesting to put them on a watchlist for study. You may even wish to checkout the newsletters as MoneyShow will focus on superior quality publishers.

 

Anavex Life Sciences (AVXL)

Tom Bishop, BI Research

Anavex Life Sciences (AVXL), which is working on a number of central nervous system (CNS) diseases, more than doubled in 2020 on more good trial results in Parkinson’s Disease Dementia (PDD) and Rett syndrome, notes Tom Bishop, growth stock expert and editor of BI Research. Meanwhile, its Phase 2b/3 Alzheimer’s trial is nearing full enrollment, and recently reported Phase 2 PDD success on dementia was encouraging in this regard. In fact, the PDD trial results were accepted and presented at an Alzheimer’s conference. Clinical trial results to date for Anavex 2-73 (oral) in all of these diseases have been consistently very positive. For example, in a Phase 2a Alzheimer’s trial those given the high dose of Anavex 2-73 saw very minimal decline in scores on the mini mental state exam and activities of daily living after 148 weeks as compared to a considerable (normal) decline in those on the low dose. Nothing on the market today can come even close to this. $10 billion is a reasonable estimate for sales of an Alzheimer’s drug that actually works (nothing on the market really does so far). And if the shares traded at just 1-2 times revenues (low for this industry), that would be a market cap of $10-$20 billion, not counting success with Rett or PDD. And even using 50% more shares than are outstanding today, that works out to $100 to $200 a share. Of course, the company would be taken over long before that if the later stage trials continue as successfully as they have to date. So, the company just has to continue to table data in late stage trials that is comparable to that reported so far. Also, noteworthy, the Michael J. Fox Foundation (for Parkinson’s) has recently agreed to provide funding of $1 million for an imaging-focused Parkinson’s Disease trial of Anavex 2-73 (previously the MJF Foundation sponsored a preclinical trial with encouraging results.). The impact on Parkinson’s Disease symptoms from the Parkinson’s Disease Dementia trail are also pending. Lot’s of potential here.

 

Arrowhead Pharmaceutical (ARWR)

Genia Turanova, Moneyflow Trader

My top biotech pick for 2021 is Arrowhead Pharmaceutical (ARWR), which operates in one of the most exciting areas of modern medicine — one with numerous potential applications longer-term, notes Genia Turanova, editor of Moneyflow Trader. Not to be confused with gene editing and gene therapy, gene silencing controls the flow of genetic information, and creates a “turn-off switch” for harmful genes before they’re able to create proteins that damage the host. With the growing possibility of simply deactivating our unwanted genes, the implications for our health are enormous. Gene silencing is already studied as a potential treatment for viral infections, cardiovascular diseases, cancer, endocrine disorders, and more. No wonder the 2006 Nobel Prize went to two American biologists, Andrew Fire and Craig Mello, for their 1998 discovery of the RNA interference (RNAi) mechanism, or gene silencing, in living cells. (RNA, or ribonucleic acid, is the part of the gene responsible for protein synthesis.) Arrowhead’s RNAi gene silencing technique can target and shut down specific genes that cause certain disease. Armed with this technology, ARWR targets all diseases that could be helped by its technology. Unlike many similar-sized biotechs, it’s not focused solely on rare diseases (or small markets). Biotechs are risky because there’s always a possibility something could go wrong — or that the original thesis or technology doesn’t live up to its early promise. Even if a company’s approach works, most biotechs are years — if not decades — away from making money off their inventions. This risk isn’t as pronounced for Arrowhead because the company already has 13 drug candidates based on its gene silencing technology and its Targeted RNAi Molecule (TRiM) platform. Going forward, this ambitious biotech plans to introduce three new drug candidates into clinical studies every year. The main focus is currently on liver diseases — but ARWR also has one drug candidate for cancer and three potential drugs for the lungs (including one that targets COVID and future pulmonary-borne pathogens). ARWR is one of the brightest stars in the mid-cap biotech universe.

 

Berkeley Lights (BLI)

Tyler Laundon, Cabot Early Opportunities

Berkeley Lights (BLI) is arguably the most attractive pure-play company in the cell-based product market. The company’s technology can measure tens of thousands of single cells in parallel, explains Tyler Laundon, editor of Cabot Early Opportunities. That means it can find the best cell out of millions and do so quickly. Moreover, Berkeley’s platform enables functional characterization quickly without killing cells. That means it helps users save the best cells for downstream development. In contrast, competing solutions often work slower and with high cell death rates. That crushes the ROI of the biopharma company using those solutions. This is why biopharma companies, CROs and CDMOs are increasingly turning to Berkeley Lights. Its platform helps them do everything they need to find therapeutic candidates faster and cheaper, often shaving three to five months off the process, boosting yields and reducing manufacturing costs. It’s a win-win-win. The company has three automation systems — Beacon launched in 2016, Lightning launched in 2019 and Culture Station just launched in January. Berkeley also sells workflow and automation software, and offers a portfolio of consumables (chips, reagents, etc.). Berkeley has also adapted its antibody discovery workflow to allow the recovery of neutralizing antibodies from Covid-19 patients, which helps researchers discover therapies. In Q3 2020 management said it sold eight systems for $12.4 million, twice what it sold in Q2. CROs and CDMOs bought half of them. The addition of new workflows and assays in the quarter aided in sales of at least six of those systems. Two more workflows are being added in 2021, which should keep system sales flowing. Adding in recurring revenue ($3.7 million) from consumables and partnership revenue ($2.1 million) Berkeley delivered quarterly revenue of $18.2 million, up 16%. While not a huge revenue base today — estimated 2020 revenue is just $60 million, up 6% over 2019 — Berkeley’s growth should take off as it places more systems in the market and starts to generate more significant recurring revenue from subscriptions and consumables. Looking into 2021 revenue could jump by 50% to $90 million and adjusted EPS loss could be cut by 25% to – $0.78. BLI came public at $22 on July 17, 2020 and soared 198% its first day. Since then, the stock has traded in a wide range — moves of 15% to 20% within a week or two are not uncommon. But the trend is up and BLI has recently made a series of higher highs and higher lows. With a market cap near $6 billion, a high valuation and a relatively recent IPO Berkeley Lights isn’t without risk; indeed, the stock is a more aggressive pick for the coming year. But the many merits make a stake in this company attractive for risk-tolerant investors. Adjust your position size based on your own risk profile.

 

Celldex Therapeutics (CLDX)

 Jay Silverman, The Medical Technology Stock Letter

Celldex Therapeutics (CLDX) has developed CDX-0159, an anti-C-KIT antibody that has blockbuster potential in various mast cell diseases, explains biotech expert Jay Silverman, contributing editor to The Medical Technology Stock Letter. CDX-0159 is a humanized monoclonal antibody that specifically binds the receptor tyrosine kinase KIT (also called stem cell factor or SCF) with high specificity and potently inhibits its activity. KIT is expressed in a variety of cells, including mast cells, which mediate inflammatory responses such as hypersensitivity and allergic reactions. KIT signaling controls the differentiation, tissue recruitment, survival and activity of mast cells. In certain inflammatory and allergic diseases, such as chronic urticaria, mast cell activation plays a central role in the onset and progression of the disease. KIT inhibition is involved in the potential treatment of various multibillion acute and chronic conditions. With a market cap of ~$700 million and ~$200 million in cash, in our view, CLDX is extremely undervalued based on the potential of CDX-0159 alone. When compared with the a $7+ billion market cap for Allakos (ALLK) — another mast cell targeted company — it appears even more undervalued to us. After releasing highly positive initial clinical data resulting in significant mast cell depletion and a clean safety, two Phase 1 trials in urticaria (rash/hives) were initiated in the fall. These clinical trials are relatively quick to perform as trials go and data are released. Data from the first study is due by March 2021. We recommend shares of CLDX. Several new top-tier biotech investors seem to agree as they have begun to accumulate positions. Lastly, as a wholly owned asset, we also think that CLDX is an attractive takeover candidate. CLDX is a “buy” under $20 with a target price of $30. Meanwhile, Myovant (MYOV) was my Top Pick last year and the stock gained 78%. The firm’s GNRH-antagonist relogilix delivered positive results in every clinical trial in 2020. Subsequently, the drug received its first FDA approval in December for treating advanced prostate cancer. At the very end of the year, MYOV formed a major partnership with global powerhouse Pfizer (PFE) to jointly develop and commercialize ORGOVYX (the brand name of relugolix) and relugolix in advanced prostate cancer woman’s health. Additional approvals are expected in 2021 for treating uterine fibroids and endometriosis. The combination of a split of the economics, a large cash infusion (no equity/dilution), PFE’s global infrastructure and the competitive advantages of relugolix on its own, the forecasts for Myovant are much greater now.

 

Esperion Therapeutics (ESPR)

Jay Silverman, The Medical Technology Stock Letter

After a frustrating 2020, Esperion Therapeutics (ESPR) is poised for a strong 2021; the firm’s new COO, Sheldon Koenig has the “right stuff,” asserts biotech expert Jay Silverman of The Medical Technology Stock Letter. We cannot think of a company that had worse luck. It successfully navigated two cardiovascular drugs, NEXLETOL (bempedoic acid) and NEXLIZET (bempedoic acid and ezetimibe), through the FDA approval process and then saw the launch of the new drugs flounder in the teeth of the COVID-19 pandemic as their sales force was unable to make person-to-person sales calls for most of last year. The worm appears to have finally turned for Esperion as the recent buyout by AstraZeneca (AZN) of Alexion Pharmaceuticals (ALXN) has presented the company with a top free agent with significant experience selling three different cardiovascular drugs at Merck (MRK), Sanofi (SNY), and Portola. Esperion recently pounced and hired Sheldon Koenig, a proven leader in the cardiovascular market, as Chief Operating Officer. Koenig is an accomplished leader in the cardiovascular space and brings over 25 years of leadership roles to ESPR having worked at Merck with Zetia (ezetimbe), Sanofi and their PCSK9 inhibitor Praluent, and Portola selling Andrexxa before Alexion. Importantly, Koenig is intimate with ezetimbe, the second drug in ESPR’s combo tablet NEXLIZET. Two other trends are working in the Esperion’s favor as we enter 2021. The first is European partner, Daichi Sankyo, has begun to gain traction selling both the drugs in Europe. The primary reason is their sales team has previous relationships with prescribers selling other Daichi Snakyo drugs, enabling them to launch to ESPR’s drugs. The second factor is the expansion of M&A in the biotech-pharma world with ESPR being a prime target with two approved drugs and an underperforming stock price. There are only so many companies with completely de-risked assets like ESPR with their two FDA approved drugs and full U.S. rights also adds to their economic appeal as the U.S. represents over half of the world’s pharmaceutical sales. In our view, Esperion Therapeutics has excellent management, and, with their new COO, the company is poised for a strong 2021.

 

MannKind (MNKD)

Nate Pile, Nate’s Notes

MannKind (MNKD) was chosen by Nate Pile — editor of Nate’s Notes — as his Top Pick last year, and the stock gained 143%. The advisor continues to recommend the stock as his ongoing favorite idea for 2021. MannKind a small biopharmaceutical company with cutting-edge technology for delivering drugs directly through the lungs. Its lead product is Afrezza, an FDA-approved form of inhalable mealtime insulin that is much faster acting than other insulins and has shown itself to be superior in virtually every way to all of the injectable mealtime insulins currently on the market for people with type 1 and type 2 diabetes. Though it has proven to be a slow and challenging process to migrate diabetics from their old ways of managing to diabetes to something new, the company is finally building some nice momentum on this front. The trend is being helped along in no small part by the fact that as more and more diabetics start using continuous glucose monitors (CGMs) to track their blood sugars in real time, they naturally start to also want an insulin that essentially works in real time – something none of the injectables can do, but Afrezza does with ease once patients have learned how to use it. Along with Afrezza (which MannKind has retained full rights to), the company has also licensed its Technosphere drug delivery technology to other companies for other drugs, and the most of exciting of these deals at the moment is one with United Therapeutics (UTHR). United Therapeutics is developing an improved version of treprostinil, a drug that is used to treat pulmonary arterial hypertension, as well as pulmonary hypertension associated with interstitial lung disease. MannKind will receive royalties on this product if/when United receives approval to begin selling it (the drug will be given a priority review by the FDA this year). MannKind has also licensed the Technosphere technology to Receptor Life Sciences, a private company that is developing pharmaceutical grade drugs in the cannabinoid space (MannKind will receive royalties on sales here as well). The company is also working to put a number of other existing drugs onto its Technosphere platform (which tends to speed up onset and improve efficacy for drugs usually taken in pill form, for example) — and these products will then either brought forward by the company itself or licensed/partnered out to others who may be interested in taking them through the regulatory and commercialization process. After being crushed by a massive wave of short-selling over the past couple of years, short interest was more than cut in half during 2020 — and though still “oversized,” short interest is continuing to shrink as the stock continues to rise. MNKD is a strong buy under $5 and a buy under $10.

 

Nine Meters Biopharma (NMTR)

Adam Johnson, Bullseye Brief Nine Meters

Biopharma (NMTR) is a biotechnology company focusing on patients with gastrointestinal (GI) issues for which no treatments currently exist. The pipeline includes two drug candidates, one for Celiac disease and one for short bowel syndrome, suggests Adam Johnson, editor of Bullseye Brief. Celiac disease is an autoimmune functional GI disease characterized by an inflammatory response to dietary gluten, causing abdominal pain and gas that are often severe and life-altering. Short bowel syndrome is a life-altering, life-threatening orphan disease caused by a significant shortening of the gastrointestinal tract. It leads to impaired nutrient absorption, diarrhea and metabolic complications. The first drug candidate, oral larazotide, represents the only Phase III therapeutic in development for Celiac disease, with interim analysis expected in the second half of 2021. Larazotide prevents the gluten breakdown product gliadin from entering systemic circulation and propagating an inflammatory response. Nine Meters aims to introduce larazotide as an adjunctive therapy in celiac disease to restore physiology, minimizing symptoms in tandem with a gluten-free diet. The second drug candidate is a long-acting, injectable NM-002 is specifically designed to address the gastric effects in short bowel syndrome patients by slowing digestive transit time. NM-002 uses a proprietary technology to extend the half-life of the GLP-1 peptide, allowing for once – to twice-per-month dosing, which considerably increases convenience for patients and caregivers. Each of these treatments has demonstrated strong initial success and may prove effective for additional indications beyond the current trials. The critical Phase III trial for Celiac will produce data in early 2021, while the drug candidate for SBS has received orphan drug status from the FDA and accelerated Phase II trials began in September. Notably, the recent recapitalization was spear-headed by well-known biotech specialist OrbiMed Advisors, which retains a seat on the board.

 

Precigen (PGEN)

John McCamant, The Medical Technology Stock Letter

The most advanced clinical programs at Precigen (PGEN) — known as PRGN-3005 UltraCAR-T and PRGN-3006 UltraCAR-T — have both delivered proof of concept data in cancer patients recently, asserts biotech sector expert John McCamant, editor of The Medical Technology Stock Letter. The company has developed an innovative & revolutionary UltraCAR-T platform. Precigen’s most advanced clinical programs — PRGN-3005 UltraCAR-T, PRGN-3006 UltraCAR-T — have both delivered proof of concept data in cancer patients recently. The UltraCAR-T platform is fundamentally differentiated from the competition and we believe will disrupt the cancer CAR-T treatment landscape by increasing patient access through rapid manufacturing, lower manufacturing-related costs, and improved outcomes using advanced technologies for precise tumor targeting and control of the immune system. The key driver of improved UltraCAR-T performance is the expression of membrane-bound interleukin-15, or mbIL15 which allows for much less expensive in-house manufacturing of CAR-T therapies. IL-15 is a master regulator cytokine that promotes T-cell activation and expansion as well as survival of memory T cells to enhance anti-tumor response. Expression of mbIL15 is shown to enhance in vivo expansion in the presence of tumor antigens and prevent UltraCAR-T cell exhaustion leading to longer persistence and an enduring anti-tumor response that outlasts conventional CAR-T cells. ActoBio, a wholly owned subsidiary of Precigen, announced new data for the Phase 1b monotherapy and Phase 2a combination study of the ongoing Phase 1b/2a clinical study investigating AG019 ActoBiotics for the treatment of early-onset Type 1 Diabetes (T1D). While early in development, AG019 has the potential to be a game changer for T1D. With three programs in human clinical trials the company is poised for significant news flow in 2021. The UltraCAR-T program is coming along incredibly well and is demonstrating that PGEN can manufacture CAR-Ts overnight in the hospital to significantly reduce expenses. We are also more than excited to see the preliminary anti-tumor activity with ULTRA-CAR-T as CAR-Ts have a tendency to work right away or not at all. Precigen has emerged as one of our favorite stocks, and in our view is still largely ignored by institutions, and we expect a very strong 2021. The stock is a “buy” under $12 with a target price of $24 per share.

 

Progenity (PROG)

Adam Johnson, Bullseye Brief

Progenity (PROG) is a diagnostic testing company focused primarily on women’s health, explains Adam Johnson, growth stock expert and editor of Bullseye Brief. The shares IPO’d in June at $15 and now trade mid-single digits, a victim of the Covid ripple effect that brought elective procedures, doctor visits and even pregnancy rates to a screeching halt. The company provides a number of genetic screening tests for fetuses and prospective parents, but its most valuable asset enables early detection of a life-threatening condition called preeclampsia which impacts 200,000 pregnancies each year… at a total cost of $9B to the US healthcare system. Preeclampsia is a pregnancy complication appearing at 20 weeks which is characterized by high blood pressure, often resulting in damage to the mother’s liver and kidneys, as well as insufficient oxygen transfer through the placenta to the infant. Once diagnosed, doctors have a number of treatment tools at their disposal, but early detection of preeclampsia is the real challenge. Progenity harnesses AI to give doctors plenty of warning in advance. No other company can match Progenity’s predictive algorithms. Separately, Progenity is developing two diagnostic tools for the gastro-intestinal tract. One is a retrievable capsule which gathers data to facilitate testing for multiple disorders, including cancer. The other is a unique drug dispensary system. Both provide additional potential upside. At the current valuation, the stock discounts only the existing genetic screening business, which creates an attractive entry point for new investors.

 

Regeneron (RGEN)

Ingrid Hendershot, Hendershot Investments

Regeneron (RGEN) is a leading biotechnology company; its science-driven approach has resulted in eight FDA-approved drugs and more than 20 product candidates in clinical development, explains Ingrid Hendershot, a lvalue-focused money manager and editor of Hendershot Investments. Sales of Regeneron’s lead drug, EYLEA, approved to treat age-related macular degeneration and diabetic edema, have grown at double-digit rates for seven years without a single price increase. In 2019, EYLEA generated net product sales in the U.S. of $4.6 billion. Global sales of Dupixent, a first-in-class treatment option for several Type 2 inflammatory diseases, jumped 151% to $2.3 billion in 2019 with numerous new indications for the drug on the horizon. In 2019, the firm’s PD-1 inhibitor Libtayo, launched just a year earlier, became the standard of care for advanced cutaneous squamous cell carcinoma, generating global net product sales of $194 million. Its COVID-19 antibody drug was authorized on Nov. 22 by the FDA to treat patients 12 years of age and older— including people over 65, who are not hospitalized but are at high risk of the disease increasing in severity. Regeneron generated healthy growth during the past five years with revenues compounding at an 18% annual rate as net income and EPS grew at a high 35% annual pace. The company routinely reinvests 30% of revenues in R&D, compared to the industry average of about 20%. Its profitable operations consistently deliver double-digit net profit margins and returns on shareholder equity exceeding 20%. Long-term investors seeking a profitable prescription should consider Regeneron, a high-quality innovator with profitable growth and a healthy balance sheet with nearly $6 billion in cash and marketable securities.

 

Vaxart (VXRT)

John McCamant, The Medical Technology Stock Letter

Vaxart (VXRT) is a leader in developing an oral vaccine for COVID-19 that would make it significantly easier to vaccinate the world, suggests John McCamant, an industry leading biotechnology expert and editor of The Medical Technology Stock Letter. A pill can be stored at room temperature, no freezer/refrigeration required, given anywhere, no syringe/nurse required, provides mucosal immunity, stops virus before entering bloodstream. VXRT is poised to deliver Phase 1/II data shortly for VXA-CoV2-1 which upon success will position it as a leader in the second wave of COVID-19 vaccines. The company’s unique vaccine pill should garner both corporate and government partnerships around the world as the easy to manufacture, off the shelf oral vaccine addresses many of the shortcomings of 1st generation vaccines. In addition, Vaxart is on Operation Warp Speed’s radar and is currently conducting a non-human primate study. In our view, positive Phase I/II data will serve as a major catalyst for VXRT in 2021. The stock is a “buy” under $15 with a target price of $30 per share. Meanwhile, our Top Pick last year was Sangamo Therapeutics (SGMO), which rose 86%. The stock recently hit a 52-week high, with its hemophilia A gene therapy with partner Pfizer (PFE), sympathy with the very strong CRSPR stocks and the potential for M&A. In 2021, we expect updates from their gene therapy and gene editing platforms in hemophilia A, sickle cell, CAR-T and Fabry disease to create value. SGMO is a “buy” under $20 with a target price of $30 a share.

 

 


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