2019 has been a good year for the stock market. Year-to-date, both the S&P 500 and the Nasdaq are up 15% and 19%, respectively. From an economic perspective, the unemployment levels and interest rates have remained low, which helped boost share prices.
That being said, the market isn’t immune to the recent dramas that have unfolded. The ongoing trade war with China and weak global growth have raised red flags among investors that a recession could be on the way, with those fears causing widespread volatility.
However, analysts are telling investors not to panic. Wall Street analysts believe that healthcare stocks still represent compelling investment opportunities amid economic uncertainty.
Using TipRanks powerful stock screener, we set out to pinpoint three stocks that command the support of the Street. You can customize the screener settings to match your investment strategy. In this case, we selected filters for healthcare stocks with a “strong buy” consensus ratings. We also specifically select stocks with big upside potential from the current share price. This is based on the upside potential from the current share price to the average analyst price target.
Now let’s delve into these three top healthcare stocks and see if they really have what it takes to fight off the market flu:
Novavax Inc. (NVAX)
The first healthcare company on our list develops vaccines that target respiratory syncytial virus (RSV), seasonal influenza and Ebola virus (EBOV).
Novavax has riled up Wall Street last week with enticing Phase III ResVax trial results. The data presented at the annual meeting of the Infectious Diseases Society for Obstetrics and Gynecology (IDSOG) on August 12 showed that the company's ResVax vaccine was able to protect infants one year after birth from all causes of pneumonia, including RSV associated pneumonia. It also highlighted the fact that protecting infants from the RSV infection can protect infants from contracting an infection from other microbes.
Investors have more reasons to be excited about the vaccine maker. On August 5, NVAX reached an agreement with the FDA on its Phase 3 trial design for Nanoflu, its seasonal influenza vaccine for adults 65 years and older. The company also partnered with Catalent Biologics (CTLT) back in June, allowing CTLT to expand its gene therapy footprint with the acquisition of Novavax’s manufacturing assets and capabilities.
B.Riley FBR analyst George Zavoico remains bullish on NVAX with a Buy rating, and his $35 price target, which seems like wishful thinking, may get another boost: “Based on these new results and other recent events, we place our price target for Novavax under review as we update our financial model of the company.” (To watch Zavoico's track record, click here)
"We do not believe these new, positive results will lead the FDA to reconsider its decision to require another Phase III trial of ResVax by maternal immunization before considering a BLA filing. While we still forecast that the European Medicines Agency (EMA) is likely to agree with the FDA on this point, we would not be surprised if, due partly to these new results, the EMA may decide to allow Novavax to file a marketing authorization application (MAA) for ResVax while also requiring a post-marketing efficacy trial to confirm the results. A decision is expected this fall," Zavoico opined.
All in all, the rest of the Street mirrors the analysts’ bullish sentiment. NVAX has a ‘Strong Buy’ analyst consensus and a $29.88 average price target, implying ~281% upside potential from current levels. (See NVAX’s price targets and analyst ratings on TipRanks)
Amarin Corporation (AMRN)
It’s no secret that Wall Street analysts like Amarin stock. It has a ‘Strong Buy’ analyst consensus and a ~$32 average price target, suggesting over 100% upside potential from current levels. (See AMRN’s price targets and analyst ratings on TipRanks)
Investors were caught by surprise recently after Amarin announced the FDA’s notice of plans to hold an advisory committee (AdCom) on the sNDA for its Vascepa drug.
4-star Roth Capital analyst Yasmeen Rahimi argues that the AdCom might work in AMRN’s favor.
While the news comes as a shock given how close AMRN is to its September 28 priority-review PDUFA for Vascepa, management stated in May that they believed an AdCom was likely as they are seeking a Vascepa label extension. As such, the AdCom gives AMRN a platform to defend its label extension as well as highlight Vascepa’s ability to reduce cardiovascular related events and deaths, its superior safety and its support from the medical community.
“AdCom allows for Vascepa discussion in a public forum, increasing awareness and transparency on key issues, and puts all this info just a click away for potential future Vascepa-prescribers to find and digest,” Rahimi opined, as she reiterates her Buy rating and $31 price target on Amarin stock.
"In totality, we believe AMRN is primed to make a strong case to the FDA and can turn this AdCom into a highlight reel of the CV benefits Vascepa offers patients," the analyst concluded. (To watch Rahimi's track record, click here)
Zynerba Pharmaceuticals (ZYNE)
Zynerba develops innovative therapies to treat Fragile X syndrome (FXS), Autism Spectrum Disorder (ASD), 22q and a heterogeneous group of rare and ultra-rare epilepsies known as developmental and epileptic encephalopathies (DEE).
Investment firm Canaccord Genuity has hosted Zynerba at its annual growth conference the day after its second quarter earnings release in which the company altered some timelines for its data readouts. Lead analyst Sumant Kulkarni believes the company is still cautiously optimistic regarding its Zygel (cannabidiol gel) in Fragile X syndrome (FXS). While its Zygel trial enrollment continues, the company hasn’t provided an end date for enrollment. ZYNE does remain confident that Zygel use in DEE treatment can deliver an adequate dose of CBD via the transdermal route.
The analyst points out that an Epidiolex CBD solution for Lennox-Gastaut/Dravet syndromesits has already been released by its competitor, GW Pharmaceuticals (GWPH). Not to mention GWPH’s market cap is $5 billion versus ZYNE’s $250 million. However, Kulkarni argues that this disparity represents a unique buying opportunity.
Based on all of the above factors, Kulkarni reiterates his Buy rating and $18 price target on ZYNE stock, which implies about 60% upside from current levels.
Kulkarni is certainly not the first analyst with an optimistic outlook for the biotech firm, as TipRanks analytics showcasing ZYNE stock as a Strong Buy. With an average price target of $22, analysts are predicting an upside of nearly 100%. In total, the stock has received 4 'buy' ratings in the last three months. (See ZYNE’s price targets and analyst ratings on TipRanks)