The key to profitable investing is building a profile that combines powerful potential with an economic entry point. It’s a strategy that often suggests taking a closer look at stocks in the micro- and small-cap range, companies with valuations below $2 billion. These smaller companies often have stock prices under $10, and triple-digit benefits to sweeten the pot.
Using The TipRanks database, we found two stocks that fit this profile: a market cap of less than $500 million and a share price of less than $10. In fact, these small-cap tickers have Strong Buy consensus ratings from the analyst community and offer a strong upside. potential.
Spar life sciences (SPRB)
We start with Spruce Biosciences, a small-capitalization biopharmaceutical company that has a specific focus on its development program. That focus is on the treatment of rare endocrine disorders that have a ‘significant unmet need’ – the industry speaks for ‘no current effective treatments’. Spruce is developing and commercializing tildacerfont, a potential treatment for congenital adrenal hyperplasia (CAH) in both adults and children, and for polycystic ovary syndrome (PCOS).
Tildacerfont is used in the treatment of diseases characterized by excessive production of adrenocorticotropic hormone (ACTH), by binding to the CRF1 receptor in the pituitary gland. The drug limits the production of adrenal androgens.
In June of this year, the company announced the results of two Phase 2 clinical trials of tildacerfont in adult CAH. The results showed that tildacerfont was safe and well-tolerated — and better, that it pushed key hormone biomarkers to normal levels in the baseline disease control group. In that group, the levels of ACTH and A4 normalized in 60% and 40% of the patients, respectively. These results, from the Phase 2 studies, tend to support the ongoing late-stage studies of tildacerfont, CAHmelia-203, and CAHmelia-204.
Spruce entered the public trading markets last October, when the company closed its IPO. The event was deemed successful as the company sold all of the offered 6.9 million shares – including the fully exercised underwriters options – at or above the initial price of $15 each. However, the share price has fallen by 45% in the months since.
Although the stock price has fallen, it was the first positive data on tildacerfont that caught the attention of HC Wainwright analyst Raghuram Selvaraju. The analyst wrote in detail about tildacerfont’s potential and noted the potential long-term gains in the company’s target market.
“Spruce seeks to position tildacerfont in both the treatment of CAH patients with poor disease control – for whom glucocorticoid (GC) agents do not work well – and CAH patients with good disease control, in whom GC agents are effective, but for whom the dependence on such drugs is highly desirable. We believe that tildacerfont may facilitate the achievement of normalized steroid hormone levels in patients with poor disease control, while reducing levels of GCs to be administered in those with good disease control. As such, we therefore consider tildacerfont to be able to address a broad market opportunity within the CAH indication. This arena alone represents a $3Ba-year market opportunity,” Selvaraju said.
In line with these comments, the analyst estimates that Spruce shares a buy price with a price target of $30. Investors will take home about 220% gains should the target be reached in the next 12 months. (To view Selvaraju’s track record, click here)
It seems that the rest of the street also sees a lot of benefits. On a buy alone basis – 4 in fact – the analyst community rates SPRB as a strong buy. The average price target reaches $29.50 and implies a potential upside of ~216% in the coming months. (See SPRB stock analysis on TipRanks)
Magenta Therapeutics (MGTA)
The second name we’ll be looking at is Magenta Therapeutics, a clinical-stage biopharmaceutical company focused on stem cell research. Stem cells are the natural precursors to every specialized cell in the body – and the transplantation processes Magenta is working on aim to harness stem cells and use their unique developmental properties to trigger the patient’s own physiological systems to regenerate and repair of diseases. Affected areas. Magenta is working on ways to harvest, condition and mobilize stem cells for the treatment of autoimmune diseases, genetic diseases and hematologic cancers.
The company has two major products in the pipeline. First, MGTA-145 is designed to work in the stem cell mobilization and collection step. The drug candidate is currently undergoing two Phase 2 clinical trials. One is testing its efficacy in the stem cell treatment process for hematologic multiple myeloma of cancer. This is being performed in combination with the existing drug plerixafor and preliminary results of the 25-patient study are expected in 2H21.
The second Phase 2 study for MGTA-145 is a collaboration with the National Marrow Donor Program and investigates the use of MGTA-145 in patients with acute myeloid leukemia (AML), acute lymphoblastic leukemia and myelodysplastic syndromes (MDS). As with the above study, this is being conducted in conjunction with plerixafor and first data are expected in the second half of this year.
Also in 2H21, Magenta will initiate a phase 2 study of MGTA-145 in the treatment of sickle cell disease.
The company’s second drug candidate, MGTA-117, has been in the news lately — and not for good reason. On Wednesday, Magenta announced a clinical hold on its new drug application (IND) for MGTA-117. As a reminder, the IND has been filed to initiate a Phase 1/2 trial with MGTA-117 in acute myeloid leukemia (AML) and myelodysplastic syndrome (MDS). The FDA is now requesting a bioassay to help increase the dose during the company’s first study in patients with hematologic malignancies. The company does not believe this bioassay is a major technical hurdle, but now expects the Phase 1/2 trial to start in 4Q21, a delay of about a quarter.
About MGTA for B. Riley, Analyst Kalpit Patel believes that the foundations of the company remain intact.
“While the clinical waiting time is a minor setback in terms of development timelines, we are encouraged that the hiccups are not related to toxicology or manufacturing issues. Our fundamental thesis that ‘117 could increase the number of patients eligible for transplants and gene therapies remains unchanged. Patel noted.
The analyst added: “In terms of subsequent catalysts, a final clinical update of MGTA-145 for autologous stem cell mobilization in multiple myeloma is expected in 2H21. In addition, the initial clinical mobilization data for the allogeneic study in leukemia is also planned to read out in 2H21 Based on promising early mobilization data, we estimate the results of the allogeneic study to be at least consistent with the efficacy revealed in the autologous setting.”
These comments support Patel’s Buy recommendation for the stock, and his $19 price target implies robust upside potential of 155% for the year ahead. (To view Patel’s track record, click here)
There is some evidence that Wall Street biotech analysts agree with Nealon here; the stock has a unanimous Strong Buy consensus rating, based on 5 positive ratings. The shares are currently trading at $7.44; their average price target of $19.20 indicates there is room for ~158% growth on the road ahead. (See MGTA stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are those of the recommended analysts only. The content is for informational purposes only. It is very important to do your own analysis before making any investment.