Biotech is one of the industries that has gained immense prominence amid the COVID-19 pandemic. The progress of vaccine development in the past few weeks has emphasized the vitality of drug and vaccine developers. Witnessing how badly a health crisis can derail public health and economies worldwide, has awakened people the need for treatments of chronic and rare diseases, demand for which are on the rise.

Biotech companies have seen their businesses flourish over the past year, and the momentum will most likely continue next year. Not just the mainstream players, but other mid- and small-cap companies are well-positioned to gain from this growth.

As negotiations over an approximately $900-billion U.S. stimulus plan continue, investors are keeping their fingers crossed. With optimism around the stimulus package, investors are keen to add winning stocks to their portfolios.

Alkermes Plc (ALKS), Editas Medicine, Inc. (EDIT), and TG Therapeutics, Inc. (TGTX), are three small biotech players that are trading 2%-6% below their 52-week highs. These stocks, we believe, still have plenty of upside left based on their fundamental strength.

Alkermes Plc (ALKS)

ALKS is involved in researching, developing, and commercializing pharmaceutical products in various therapeutic areas in the United States, Ireland, and globally. ARISTADA, VIVITROL, RISPERDAL, and CONSTA are some of its flagship drugs that are used for the treatment of conditions such as schizophrenia, bipolar disorder, and alcohol and opioid dependence.

ALKS has announced a potential monetization of non-core assets and reiterated its commitment to explore strategic collaborations regarding ALKS 4230, an immuno-oncology drug. The company has committed to non-GAAP net income margin targets of approximately 25% for FY 2023 and nearly 30% for FY 2024.

During the third quarter ended September 30,2020, ALKS’s total revenue climbed 3.9% year-over-year to $265 million. Net sales of proprietary products were $142.7 million, while manufacturing and royalty revenues were $120.4 million. CEO Richard Pops stated, “Our third quarter results reflect strong commercial execution, with the sequential growth of both VIVITROL and ARISTADA net sales within a complex and dynamic COVID-19 market environment.”

Analysts expect revenue for the fourth quarter ending March 31, 2021 to be $253.2 million, representing a 2.8% increase year-over-year. Meanwhile, EPS for the next quarter is likely to grow 500% to $0.07. The company has raised its guidance for total revenue to a range of $1 billion to $1.04 billion from $965 million to $1 billion.

On a year-to-date basis, ALKS has surged 6.2% to close yesterday’s trading session at $21.67. The stock is trading 2% below its 52-week high of $22.10. Over the past six months, the stock climbed 27%.

How does ALKS stack up for the POWR Ratings?

A for Trade Grade

A for Buy & Hold Grade

A for Peer Grade

A for Industry Rank

A for Overall POWR Rating

The stock is ranked #16 of 240 stocks in the Medical – Pharmaceuticals industry.

Editas Medicine, Inc. (EDIT)

EDIT is a clinical stage genome editing company that focuses on developing transformative genomic medicines to treat a range of serious diseases. The company has developed a proprietary genome editing platform based on CRISPR technology. EDIT also develops EDIT-102 for the treatment of Usher Syndrome 2A.

EDIT has announced that it has submitted an Investigational New Drug (IND) application with the U.S, Food and Drug Administration (FDA) for the initiation of a Phase 1/2 clinical trial of EDIT-301. The IND submission is a critical milestone for EDIT as it advances several ex vivo cell therapy medicines. The Company has previously received a Rare Pediatric Disease designation from the FDA for EDIT-301.

During the third quarter ended September 30, 2020, EDIT’s total revenue surged 1533% year-over-year to $62.8 million. The company’s EPS for the quarter was $0.12 compared to a loss per share of $0.66. At the end of the quarter, the company’s cash and cash equivalents were $541.3 million. The company’s CEO, Cindy Collins, said, “We are on track to file the IND for EDIT-301 for sickle cell disease in the fourth quarter and are eager to present additional data on this potentially best-in-class medicine.”

The consensus revenue estimate for full year 2020 is $85 million, signaling a 314.1% surge year-over-year. For 2020, EPS is expected to grow 36.2%.

EDIT has soared 111.8% on a year-to-date basis to end yesterday’s trading session at $62.71, 6.6% below its 52-week high of $66.84. Over the past six months, the stock has climbed 109.8%.

EDIT’s POWR Ratings reflect its promising outlook. It has an overall rating of “Buy” with an “A” for Trade Grade and Peer Grade, and a “B” for Buy & Hold Grade and Industry Rank. Among Biotech stocks, it is ranked #51 out of 403.

TG Therapeutics, Inc. (TGTX)

TGTX is a biotech company involved primarily in the acquisition, development, and marketing of various treatments for autoimmune diseases B-cell and malignancies. The company also develops a B-cell directed research for identifying the key B-cell pathways for rapid clinical testing.

TGTX announced that it has initiated a $200 million public offering of its common stock at a price of $43.50 per share.  The company intends to use the t proceeds of offering to finance the continued development of ublituximab and umbralisib.

During the second quarter ended June 31, 2020, TGTX’s revenue was flat at $38 million. Loss per share for the quarter was $0.47 compared to the loss per share of $0.42 posted in the same period last year. TGTX ended the quarter with $275 million in cash and cash equivalents.

The Street expects revenue for the quarter ending December 31, 2020 to decline 47.4% year-over-year to $20,000. Meanwhile, its EPS is likely to grow at a rate of 14.6% per annum over the next five years.

TGTX closed yesterday’s session at $51.76, rallying 366.3% on a year-to-date basis. It is currently trading 3.9% lower than its 52-week high of $53.77. The stock has surged 186.2% over the past six months.

It is no surprise that TGTX is rated “Strong Buy” in our POWR Ratings system. It also has an “A” for Trade Grade, Buy & Hold Grade, Peer Grade, and a “B” for Industry Rank. Within the Biotech industry, it is ranked #12.

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ALKS shares were trading at $21.91 per share on Friday afternoon, up $0.24 (+1.11%). Year-to-date, ALKS has gained 7.40%, versus a 15.92% rise in the benchmark S&P 500 index during the same period.

About the Author: Namrata Sen Chanda

Namrata is an accomplished financial journalist, with nearly a decade of experience. She specializes in interpreting news releases and framing investment strategies, and has worked with some of the leading companies in real estate, banking, insurance, mutual funds, financial research, fintech, and investment education. More...

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