With two full months of 2023 behind us, it’s hard to say just how this year is going to shape up. January saw a strong rally, while February was volatile and market analysts and economists are still debating where the long-term trends will head.
But what can the retail investor do, while the professionals are debating? A turn to the data may yield some answers – and give clues toward compelling stocks. The Smart Score data tool from TipRanks is specially designed to cut through the fog of uncertainty. The Smart Score algorithm gathers the aggregated data on nearly 9,000 publicly traded stocks, and then it measures the data and the stocks against a set of factors, 8 in all, that have all proven effective predictors of future share outperformance. Each stock is given a score, a simple digit on a scale of 1 to 10, with a ‘perfect 10’ indicating that everything is in alignment – and indicating that investors should pay closer attention to this one.
So, to get started, we’ve pulled up the TipRanks data on two healthcare-related stocks that have both earned the Smart Score’s perfect 10. At first glance, these are both Strong Buy-rated shares with double-digit upside potential for the year to come. Some closer attention may let us know just what else makes these two stocks so compelling right now.
Agios Pharmaceuticals, Inc. (AGIO)
First up is Agios Pharma, a company focused on cellular metabolism and the development of new treatments for genetically defined severe diseases. The company’s initial focus has been on therapeutic agents for hemolytic anemias, a serious condition defined by the loss of red blood cells faster than the body can replace them. Hemolytic anemias are usually symptomatic of an underlying condition, and Agios’ first drug candidate, mitapivat, has already been approved for the treatment of adult PK deficiency (PKD).
That approval came in Febuary of last year, and the company has been working on the commercialization of mitapivat, branded as Pyrukynd, since then. In the fourth quarter of 2022 – the last quarter reported – Agios showed product revenues from Pyrukynd sales totaling $4.3 million. The company had completed prescription enrollment forms from 105 unique patients at the end of 4Q22, and a total of 78 patients on Pyrukynd prescriptions. Those 78 patients represent a 39% quarter-over-quarter increase.
The strong launch of Pyrukynd is not Agios’ only catalyst. The company currently has mitapivat under investigation in multiple human clinical trials, with the two leading ones being a Phase 2 trial against sickle cell disease and a Phase 3 trial against thalassemia. Important events this year include completion of enrollment in the Phase 3 ENERGIZE and ENERGIZE-T studies of Pyrukynd/mitapivat in the treatment of thalassemia, and on the sickle cell track, a Phase 2 data readout and the ‘go/no go’ decision on advancement to a Phase 3 trial – anticipated by mid-year.
Turning to the Smart Score, we find that three particular factors are strongly positive, supporting this stock’s Perfect 10. On the technical side, the simple moving average, a measure of the stock’s price trend, registers positive, while the financial bloggers, who are usually most fickle about their choices, are 100% bullish here. And of the hedge funds tracked by TipRanks, holdings in AGIO increased by 515,000 shares last quarter.
The key points for Piper Sandler analyst Christopher Raymond revolve around the company’s ability to take multiple shots on goal with one drug product. As Raymond writes, “[We] believe the company’s lead asset – Pyrukynd (mitapivat) – has novel MoA (mechanism of action) to address hemolytic anemia in several rare diseases. While already approved in an ultra-rare disease, PK deficiency (PKD) in adults, we believe that real value drivers for AGIO will be approval in larger indications including the entire thalassemia spectrum (not just beta-thalassemia) and sickle cell disease (SCD), for which development is currently underway. Given the promising PoC (proof of concept) and efficacy data so far in both these indications, we believe that Pyrukynd has the potential to become a true pipeline-in-a-product driving meaningful upside for the stock.”
Based on the above, Raymond gives AGIO an Overweight (Buy) rating, and his $41 price target implies a 68% upside potential for the coming year. (To watch Raymond’s track record, click here.)
While the Piper Sandler view is particularly bullish, the Street is also generally optimistic about Agios. The company has 5 recent analyst ratings on file, including 4 to Buy and 1 to Hold, for a Strong Buy consensus rating. With an average price target of $39.25 and a current trading price of $24.44, the stock has an upside of 61% out to the one-year time horizon. (See AGIO stock analysis on TipRanks)
Prometheus Biosciences (RXDX)
The second stock on our Perfect 10 list is Prometheus Bioscience, a biopharma firm developing new treatments for autoimmune gastrointestinal conditions, particularly inflammatory bowel diseases (IBD). Prometheus is following a biomarker-targeted approach to create therapeutic agents, using a unique profile for each patient. This mode of treatment, patient-centric, offers a chance to transform the treatment of immune-related intestinal conditions.
While most of this company’s pipeline is still in pre-clinical discovery phases, the lead drug candidate, PRA023, has shown promise in the treatment of both Crohn’s disease and ulcerative colitis (UC). This past December, Prometheus underlined that promise when it announced strongly positive results in two Phase 2 clinical trials of PRA023, in the treatment of both Crohn’s and UC. On the Crohn’s track, the APOLLO Phase 2 trial demonstrated the drug’s effectiveness in lowering inflammation and reducing fibrosis; in all, the trial produced a 49.1% remission rate. Alongside that, the ARTEMIS trial in the treatment of UC achieved its primary endpoint, with 26.5% of patients entering a clinical remission. Drug safety levels and tolerance were acceptable in both trials.
This was big news for Prometheus, and the stock spiked on the announcement. RXDX was trading at $36 on December 6, 2022; by December 8, the stock was up to $117 – and it remains at those elevated levels. The company moved quickly to cash in on this clinical success through an upsized public stock offering, putting more than 4.5 million shares on the market. This sale, an event that would usually result in dilution and price reduction, raised $470.5 million in net proceeds – and did not dent the share price. Prometheus has already stated that it will use the new funds to support its ongoing clinical programs.
When we look at Prometheus’ Smart Score, we find that most of the factors are swinging strongly positive. These include 100% positive blogger sentiment, and ‘very positive’ crowd sentiment – with 8.7% increases in holdings for the past 30 days. The hedges also increased their holdings here, by 186,500 shares last quarter, and the technical factors show a positive simple moving average and a 12-month upward momentum of 184%.
Michael Yee has written Jefferies’ coverage on this stock, and sees the active pipeline as the key point for investors here. Noting the company’s recent successes, he goes on to outline its potential as an acquisition target. Yee says of Prometheus, “[The] story is increasingly attractive given two late-stage studies for large indications and a nice cadence of catalysts for early-stage programs which all should keep investors excited and make the stock very interesting in 2023 and 2024. Ultimately we think RXDX is an attractive strategic asset for big pharma given the best IBD data to date of any drug. ARNA was acquired for $7B and RCPT acquired for $7B for their S1P1 oral UC drugs and RXDX so far has much better efficacy.”
What this adds up to, in Yee’s view, is a Buy rating for RXDX and a price target of $160 indicating potential for the stock to grow 27% this year. (To watch Yee’s track record, click here.)
Yee is bullish – but he’s far from the only bull on the Street. All 10 of the recent analyst reviews here are positive, all naturally culminating in a Strong Buy consensus rating. The current trading price is $125.73, and the average price target of $153.10 suggests a one-year upside potential of 22%. (See Prometheus’ stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.