Blink, and you might just miss it. We are referring to the colossal gains that can be achieved by a select group of stocks in almost no time at all, namely those inhabiting the healthcare sector. But how is it that these types of investments can reach such heights overnight? The answer, as it turns out, is related to the nature of the industry itself.

Unlike other names, these companies count on only a few vital indicators like the release of data or FDA rulings. As a result, a single update can act as a catalyst, with the power to rapidly catapult shares in either direction. This volatility and the risk that come with it can be enough to ward off some investors. For others, these stocks represent some of the most captivating growth plays the Street has to offer.

Based on this, seasoned Street veterans argue that the right time to snap up shares of a healthcare name might just be ahead of key catalysts. However, once a potential portfolio addition has been identified, it isn’t always easy to determine if it’s the most compelling investment. That’s where TipRanks comes in.

Taking advantage of TipRanks' Stock Screener tool, we were able to find out what Wall Street analysts are saying about 3 healthcare stocks as they approach important catalysts in the first quarter. Not only is the analyst community bullish, with each earning a Strong Buy consensus rating, but the stocks also boast substantial upside potential from current levels. Let’s jump right in.

Karyopharm Therapeutics (KPTI)

Karyopharm Therapeutics’ primary goal is to develop treatments that will help patients in their battles against cancer. Thanks to its innovative oral Selective Inhibitor of Nuclear Export (SINE) technology, its products could potentially inhibit Exportin 1 (XPO1), a protein that decreases the body’s ability to defend against tumors.

With Phase 3 BOSTON study data for its Selinexor (Xpovio) drug scheduled for release this quarter, Wall Street’s focus has shifted towards KPTI. The therapy, which has already been approved for relapsed or refractory multiple myeloma (RRMM) treatment in patients that have received at least four previous therapies, is being evaluated for use in earlier lines of treatment. Specifically, the BOSTON study will provide data on its ability to treat patients with multiple myeloma who have already received one to three lines of therapy.

J.P. Morgan analyst Eric Joseph tells clients that he expects a favorable outcome based on its SVd performance in the Phase 1b/2 STOMP study and the control Vd regimen’s previous performance. On top of this, the four-star analyst noted that the FDA’s statements about Xpovio’s accelerated approval in July as well as physician experience with SVd support this conclusion. While he did acknowledge that the readout window does create some risk, he wrote in a note to clients that “current levels still reflect overly cautious risk assumptions for BOSTON against a base case peak sales opportunity.”

In line with this bullish thesis, Joseph maintained an Overweight rating in addition to increasing the price target by $4. At the new $27 price target, shares could surge 54% in the next twelve months. (To watch Joseph’s track record, click here)

In general, the rest of the Street is on the same page. 5 Buys and a single Hold add up to a Strong Buy analyst consensus. Additionally, the $25.60 average price target puts the upside potential at 46%. (See Karyopharm stock analysis on TipRanks)

Kala Pharmaceuticals (KALA)

Switching gears now, Kala Therapeutics is focused on treatments for eye diseases. Due to its proprietary mucus-penetrating particle (MPP) technology, the analyst community has been keeping tabs on this biopharma.

After the company received a complete response letter (CRL) for the KPI-121 0.25% (EYSUVIS) NDA, its Dry Eye Disease therapy, the upcoming Phase 3 STRIDE 3 trial top-line data readout has attracted significant attention as this data will be used in its CRL response. Management stated that they have decreased the patient variability in STRIDE 3 that led to missing statistical significance for ocular pain in the STRIDE 2 Phase 3 trial. With the readout expected sometime from late February to the end of March, an NDA could be resubmitted in the first half of 2020, should the results be positive.

For Wedbush’s Liana Moussatos, the large market opportunity is enough to get her on board. “We estimate that in 2027 gross annual sales for KPI-121 0.25% could reach about $1.89 billion for Dry Eye Disease. We project full year profitability in 2021 with about $173 million in revenues in 2021 (~$87 million for Dry Eye and ~$86 million for Post-Surgical Inflammation and Pain),” she commented. As KALA represents a “buying opportunity”, she reiterated her Outperform call. Most noteworthy, however, is her $51 price target, which is the highest on the Street and suggests 694% upside potential. (To watch Moussatos’ track record, click here)

While not nearly as aggressive as Moussatos, Oppenheimer analyst Esther Rajavelu is still very much in favor of KALA. “We maintain our Outperform rating as we believe Eysuvis (if approved) may address significant unmet needs in the nascent dry eye disease market, which we estimate could be a $3B US market opportunity. We remain positively skewed on STRIDE-3 readout anticipated in 1Q20, as the changes in trial inclusion/exclusion criteria could meaningfully increase the probability of success,” she explained. Based on this assumption and the lower operating expenses, the analyst increased the price target from $9 to $12 along with her bullish call. (To watch Rajavelu’s track record, click here)

Looking at the consensus breakdown, the rest of the Street also has high hopes. A Strong Buy consensus rating breaks down into 3 Buys and 1 Hold assigned in the last three months. Not to mention the $19.75 average price target implies 208% upside potential. (See Kala stock analysis on TipRanks)

Kadmon Holdings (KDMN)

With a proven track record of successful drug development, Kadmon Holdings wants to offer cutting-edge medicines for immune and fibrotic diseases as well as immuno-oncology therapies. As it prepares for a Pivotal trial data readout for its late-stage candidate, KD025, in chronic graft-versus-host disease (cGVHD), some think that 2020 could be a big year for KDMN.

Analysts are even more excited about the company’s prospects after it was announced that INCY’s candidate itacitinib failed to meet its Phase 3 endpoint for treatment-naive acute GVHD. Cantor Fitzgerald’s Eliana Merle argues that the itacitinib setback indicates significant commercial upside for Kadmon’s candidate and supports its safety profile.

“We think KD025's differentiation on safety/tolerability could be a key driver of longer duration of use (and ultimate market opportunity),” the analyst stated. On top of this, she believes that the design of KD025’s trial lends itself to a favorable outcome. Itacitnib was evaluated in the acute steroid-naive setting, which makes it more difficult to achieve a successful result, while KD025 was studied in the steroid-refractory chronic environment.

Merle added, “We continue to see the cGHVD market opportunity as underappreciated for KDMN's KD025. We model $500 million in U.S. peak sales and we see INCY's update as supportive of this opportunity.”

It makes sense, then, that the analyst stayed with the bulls, leaving the Overweight rating and $10 price target unchanged. Should the target be met, a 118% twelve-month gain could be in the cards. (To watch Merle’s track record, click here)

What do other Wall Street pros think? As 100% of the analysts that have published a review in the last three months were bullish, the word on the Street is that KDMN is a Strong Buy. With a $13.25 average price target, the upside potential comes in at 189%. (See Kadmon stock analysis on TipRanks)