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In early August, the chief of Wells Fargo Securities, Chris Harvey, pegged the S&P 500 to a target price of 3388 points. It turns out, he underestimated the market rally by quite a bit. As we enter September, the S&P 500 currently sits at 3455 points. This leads Harvey to believe that the market is not going to hit a wall anytime soon. In fact, two of the best biotech stocks may rally further — by over 70%.
Top Biotech Stocks September 2020
Although the CDC recently revealed that only 6% of the 161,392 deaths can be attributed to COVID-19 alone — which would constitute a total of 9,683 deaths — fears over the virus remain front and center.
In normal circumstances, one would find it odd that an economy needed to be shut down over something comparable to the flu. One would also find it odd that medical institutions were exceedingly eager to massively over-report COVID-19 cases.
Nonetheless, when it comes to human societies, perception is the name of the game. Experimental and fast-tracked COVID-19 vaccines are set to create a major market event likely to occur in the first half of 2021. And, according to Chris Harvey of Wells Fargo, it needs to be priced into stocks sooner rather than later:
“COVID figures and vaccine prospects improve, small caps are positioned to outperform as the market rewards cyclical (economic) exposure.”
Harvey’s colleague at Wells Fargo, Jim Birchenough, has concluded that two particular small-cap stocks are poised to rally by at least 70%. As a reminder, small-cap stocks are those with a market capitalization between $300 million and $2 billion.
Presenting a broader solution for COVID-19 and cancers, in the form of immunotherapy treatments such as DPX-COVID19, IMV has entered Phase 1 of clinical trials. Boosted by the Canadian government with CA$4.75 million, IMV’s DPX-COVID19 is currently best-in-class, according to the Canadian Minister of Innovation. It owes this to a novel polypeptide approach that led to increased antibodies, IgA, and T-cell responses.
The results from the Phase 1 trial are expected to conclude this fall, subsequently starting the Phase 2 trial afterwards. Delving deep into the DPX-COVID-19 characteristics, analyst Birchenough is optimistic about DPX-COVID-19’s ability to prolong the induced immuno-response. This means it could be more effective in treating the core demographic affected by COVID-19: elderly with co-morbidities.
On the deployment and manufacturing front, IMV has already produced numerous batches of the vaccine and set up a manufacturing process for mass development. Moreover, IMV’s cancer vaccine’s top-line data (unblinded summary of demographics and safety) is set to be published in the second half of 2020.
Accordingly, Birchenough places IMV on an Overweight rating, which is a strong recommendation for a buy, at a price target of $11, from the current $4.
Sutro Biopharma Inc. (NASDAQ:STRO)
In a similar vein as IMV, Sutro Biopharma is heavily involved with a new breed of therapy dealing with cancer and autoimmune responses. Specifically, cytokine derivatives, bispecific antibodies, and antibody-drug conjugates (ADCs).
The latter show outstanding prospects in the treatment of ovarian cancer, with its patented STRO-002 ADC. Furthermore, Sutro partnered with Bristol Myers Squibb to develop a second ADC, CC-99712, for the treatment of bone marrow cancer.
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Thus far, STRO-002 ADC demonstrated a 62% CA-125 response rate, and CC-99712 ADC showed a 31% overall response rate (ORR). On the other hand, Sutro’s direct ADC competitor, GlaxoSmithKline, reports drastic vision impairment with their ADC. This sets CC-99712 to be a major windfall for Sutro’s valuation nearing the end of 2020.
Birchenough places Sutro’s stock to an Overweight with a price target of $18, from the current $13.
How long do you think it will be before these top biotech stocks take flight? Let us know in the comments section below.