Investors exposed to the biotech sector have seen mixed results this year. In contrast to the biotech boom from October 2020 to December 2021, valuations follow a downturn trend. Alongside similar funds, iShares Biotechnology ETF (IBB) generated a 9% year-to-date loss.
Pfizer (NYSE: PFE) best exemplified the negative trend after the viral hype died down, losing 40% of its value YTD. Biotech equity is experiencing capital stagnation in the new high interest rate environment.
Yet, some small to mid (SMID) capped biotech firms managed to buck the trend, valued between $2 billion and $10 billion. Considering the overall downturn in the biotech sector, a discount bias is likely in place. As such, these growth stocks are riskier investments but offer greater return potential.
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ImmunoGen (NASDAQ: IMGN)
According to the National Center for Biotechnology Information, about 90% of drugs that enter clinical trials fail to be deployed to the market. This is the main source of volatility for the biotech sector.
ImmunoGen is a clinical-stage biotech firm focused on next-gen cancer treatments. The company pushes the envelope with antibody-drug conjugates (ADCs) to elevate cancer survivability. More specifically, by precision-targeting tumor cells with anticancer drugs as they attach to monoclonal antibodies.
One of these ADCs is Elahere (mirvetuximab soravtansine-gynx). In October, the European Medicines Agency approved ImmunoGen’s marketing application for ovarian cancers. In the Q3 earnings release, the company reported strong revenue results from Elahere, beating expectations.
Against the expected $0.02 earnings per share (EPS), ImmunoGen reported $0.1 EPS. Total revenue for the quarter reached $113.4 million, with a 36% increase in net quarterly sales. Owing to the success of the Elahere oncological star, IMGN stock is up +233% year-to-date.
Based on 14 analyst inputs pulled by Nasdaq, IMGN stock is a “strong buy.” The average IMGN price target is $21 vs current $16. The high estimate is $28, while the low forecast is just below the current price at $14 per share.
Amphastar Pharmaceuticals (NASDAQ: AMPH)
This specialty biotech company focuses on developing and manufacturing injectable and infusion products. These are typically used in oncology, cardiology, and infectious diseases, ranging from Epinephrine and Lidocaine to Naloxone and Glucagon.
In June, Amphastar finalized its acquisition of the pioneering glucagon nasal spray Baqsimi, developed by Lily as an emergency tool for hypoglycemia treatment in diabetes patients.
In September, Amphastar announced a private and public offering of $300 million in convertible senior notes. Without diluting shareholders’ AMPH value, the company can continue to fund research and development.
In the Q3 earnings report, Amphastar generated $180.6 million in net revenue, up 50% from a year-ago quarter. The biotech firm greatly outperformed the sector, beating its EPS estimates 75% of the time in the last 12 months. In Q3, it exceeded Zacks consensus estimate of $0.93 EPS at $1.01 per share.
Year-to-date, AMPH stock is up +101%. Based on 5 analyst inputs pulled by Nasdaq, AMPH stock is a “strong buy.” The average AMPH price target is $59 vs current $56. The high estimate is $63, while the low forecast is aligned with the present range at $55 per share.
Mirati Therapeutics (NASDAQ: MRTX)
Similar to ImmunoGen, Mirati is a clinical-stage biotech firm focused on oncology therapies targeting KRAS mutations. These types of protein errors are responsible for many cancer developments.
Mirati’s leading product candidate, Krazati (adagrasib), aims to inhibit specific KRAS G12C mutations, responsible for many common non-small lung cancers (NSCLC). The FDA granted this drug an accelerated approval for adult patients in December 2022.
Owing to the Q3 earnings report, MRTX stock yielded 21% performance year-to-date, or 50% in the last three months. The firm’s revenue went up 154% year-over-year to $13.7 million, with a similar net loss of $176.9 million (the year-ago loss was $176.5 million). Although there was a dilution pressure worth $300 million in public stock offering, investors took it as bullish.
Namely, Mirati is ramping up multiple Krazati pipelines. In addition to KRAS G12C inhibitors, the company is developing combinatorial therapies with KRAS G12D and SOS1 (solid tumor) inhibitors.
Based on 18 analyst inputs pulled by Nasdaq, MRTX stock is a “buy.” The average MRTX price target is $60.1 vs current $56. The high estimate is $72, while the low forecast is above the present price at $58 per share.
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