The COVID-19 pandemic has proven to be a positive catalyst for the biotechnology industry, thanks to its role in fighting the deadly virus. As the world grapples with new strains of the virus, biotechnology companies are ramping up their production of medicines and vaccines to cater to these growing needs. Furthermore, continued investments in R&D and new therapies, along with rapid technological advancements, are driving the industry’s growth. The global biotechnology market is expected to grow at a CAGR of 15.8% and reach $2.44 trillion by 2028.
The rising geriatric population, increasing healthcare expenditures, and advances in various drug discoveries have contributed to bullish investor sentiment. This is evident from the iShares Biotechnology ETF’s (IBB) 27.4% return over the past year.
Considering the industry’s promising growth prospects, Wall Street Analysts expect biotechnology stocks Kura Oncology (KURA) and Corvus Pharmaceuticals Inc. (CRVS) to deliver exceptional returns in upcoming months.
Kura Oncology (KURA)
KURA is a clinical-stage biopharmaceutical company engaged in discovering and developing customized medicines to treat solid tumors and blood malignancies. It primarily focuses on developing small-molecule product candidates that target cell-signaling pathways involved in advancing certain malignancies.
Last month, KURA announced a clinical collaboration with Novartis to study the combination of Tipifarnib and Alpelisib in patients with head and neck squamous cell carcinoma (HNSCC) with HRAS overexpression or PIK3CA mutation and/or amplification. This partnership will enable KURA to expand the use of Tipifarnib to a higher percentage of patients and strengthen its position in the industry.
KURA's cash, cash equivalents, and short-term investments came in at $567.5 million in the second quarter that ended June 30, 2021. In addition, the company's research and development expenses totaled $21.1 million over this period, compared to $13.7 million in the second quarter of 2020.
The company’s EPS is expected to grow at a rate of 19.9% per annum over the next five years. The stock has gained 3.9% over the past year.
The two Wall Street analysts that provide ratings for the stock rate it a Buy. Closing yesterday’s trading session at $18.32, the average analyst price target of $41.50 represents a potential 126.5% upside.
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Corvus Pharmaceuticals Inc. (CRVS)
CRVS is primarily involved in the development and commercialization of immuno-oncology treatments. The company is working on medicines and antibodies that target critical immunological checkpoints and reprogram immune T-cells. It has four immuno-oncology projects in development, three of which target the adenosine-cancer axis to regulate an immune response.
Last month, CRVS announced that it had halted the Phase 3 research of mupadolimab for COVID-19, owing to the positive trends shown by the COVID-19 vaccinations in reducing severe illness and hospitalizations. The company is prioritizing resources on mupadolimab in oncology and intensifying the efforts in its cancer programs.
In May, CRVS completed the sale of approximately $10 million of its common shares via the company's ATM program, which was launched on March 9, 2020. The company sold 3,564,228 new shares to EcoR1 Capital, a fundamental biotechnology-focused investment advice business, and 35,714 new shares to Richard A. Miller, the company's co-founder, president, and chief executive officer.
In the second quarter that ended on June 30, 2021, CRVS’ cash, cash equivalents, and marketable securities increased 50.2% year-over-year to $66.46 million. Its general and administrative expenses declined 25% year-over-year to $2.18 million. The company's interest income stood at $1000 over this period. The company's EPS is expected to grow 18.3% next year.
Of the three Wall Street analysts that provide ratings for the stock, two rate it Buy. The consensus price target of $4.83 represents a 141.5% potential gain from its last closing price of $5.06.
KURA shares were trading at $18.25 per share on Friday morning, down $0.07 (-0.38%). Year-to-date, KURA has declined -44.12%, versus a 19.03% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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