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Day after day, investment-bank analysts pin new price targets to biotech stocks. Adjustments are usually minor, but recent upgrades suggest these two drugmakers are worth a lot more than most investors realize.
Price targets always come with some important caveats, and meeting them is far from guaranteed. This is why buying any biotech stock hoping it will quickly reach a lofty new price target is an investing strategy that rarely works out.
Here's what you need to know about a couple of attention-getting upgrades making waves at the moment.
| Company (Symbol) | Recent Market Cap | Recent Share Price | New Price Target | Implied Upside | Investment Bank |
|---|---|---|---|---|---|
| Allogene Therapeutics (NASDAQ: ALLO) | $3.6 billion | $30.50 | $45 | 48% | Oppenheimer |
| Collegium Pharmaceutical (NASDAQ: COLL) | $459 million | $13.74 | $23 | 67% | H.C. Wainwright |
Data sources: Yahoo Finance! and analyst notes.
Allogene Therapeutics: Off the shelf
New cancer treatments that modify a patient's own cells to attack cancer are wonderfully effective, but harvesting, modifying, and then reinfusing stem cells is a long, complicated process that has impeded their commercial launches. Allogene Therapeutics is clinical-stage biotech developing an off-the-shelf solution that oncologists can quickly administer to patients with a lot less hassle.
Citing a handful of clinical trial readouts expected over the next year and a half, Oppenheimer analyst Mark Breidenbach thinks this $3.6 billion biotech is worth around $5.3 billion. That seems a bit dear for a company with one potential new drug in mid-stage clinical trials and one more scheduled to begin in the first half of 2019.
In a phase 1 study with Allogene's lead candidate, UCART19, an impressive 14 out of 17 relapsed patients with an aggressive form of leukemia that were given an anti-CD52 drug with their lymphodepletion regimen achieved complete remission. The study enrolled 21 patients, but all four patients that didn't respond to UCART19 also weren't given an anti-CD52 drug beforehand.
Image source: Getty Images.
Although 14 complete responses out of 21 treated is still an impressive result, there are two cellular cancer therapies aimed at the same target already on the market that are arguably better, plus dozens more in development. ALLO-501 is convenient, but without an efficacy profile that matches available treatments, convenience won't be enough to drive significant sales.
Allogene will begin human trials with ALLO-501 and relapsed non-Hodgkin's lymphoma patients before the end of June. The study will also test ALLO-647, a potential new anti-CD52 antibody as part of an immune cell depleting regimen. This is a necessary step before ALLO-501 cells can be infused with a chance to graft.