Analysts Hunt for Undervalued Biotech Stocks

Rhea-AI Summary

Analysts are hunting for undervalued biotech stocks, with Citius Pharmaceuticals (NASDAQ: CTXR) gaining attention. EF Hutton initiated coverage with a Buy recommendation and $6.00 price target, citing low risk and high reward potential based on two late-stage therapeutics: Mino-Lok and LYMPHIR. Catalysts include a planned IPO for LYMPHIR and an early August PDUFA. The biotech sector saw a strong start in 2024, driven by M&A activity and potential interest rate declines. Morningstar highlighted several undervalued biotech stocks, including Intellia Therapeutics, Crispr Therapeutics, and Jazz Pharmaceuticals. The industry group has a Relative Strength Rating of 83, ranking in the top 17% of all industry groups in 12-month performance.

Positive

• EF Hutton initiated coverage of Citius Pharmaceuticals with a Buy recommendation and $6.00 price target
• Citius has two late-stage product candidates: Mino-Lok and LYMPHIR
• Planned IPO for LYMPHIR and early August PDUFA could be catalysts for Citius
• Biotech sector saw strong start in 2024 due to M&A activity
• Industry group has a Relative Strength Rating of 83, ranking in top 17% of all industry groups

Negative

• Second quarter has been more mixed for the biotech industry due to stabilizing interest rates
• Higher interest rates make waiting for uncertain returns on biotech investments less attractive

Insights

Financial Analyst

With EF Hutton's Buy recommendation for Citius Pharmaceuticals (NASDAQ: CTXR) and the planned IPO for LYMPHIR this summer, the financial landscape of the company shows significant potential. The initiation of coverage and a $6.00 price target suggest confidence in the company's pipeline, particularly with Mino-Lok and LYMPHIR. These products, being in late-stage development, highlight a reduced risk profile inherent in their business model compared to early-stage biotechs.

Mino-Lok's potential for approval as the first treatment to salvage infected central venous catheters indicates a substantial market opportunity. The lack of competition in this niche can translate to a strong market penetration and pricing power, improving margins and revenue potential. LYMPHIR's pending FDA approval adds another potential revenue stream, with the anticipated regulatory decision on August 13 being a significant near-term catalyst.

However, investors should consider the inherent risks of biotech investments, including the reliance on regulatory approvals and successful commercialization. The planned IPO could provide non-dilutive financing, but market conditions and investor sentiment will play important roles in its success. Given these factors, while the stock presents high potential rewards, it also brings typical biotech sector risks, especially considering the impact of interest rates on speculative investments.

Medical Research Analyst

Mino-Lok and LYMPHIR represent significant advancements in their respective treatment areas. Mino-Lok, designed to treat catheter-related bloodstream infections (CRBSI), offers a novel approach by salvaging the central venous catheter, potentially reducing the need for replacements and associated complications. This innovation could set a new standard of care, enhancing patient outcomes and reducing healthcare costs.

LYMPHIR, a recombinant fusion protein targeting IL-2 receptors, represents a promising therapeutic for peripheral T-cell lymphoma (PTCL) and cutaneous T-cell lymphoma (CTCL). Given its orphan drug designation, LYMPHIR has the potential for expedited FDA processes and extended market exclusivity. Both products, if successfully commercialized, could address unmet medical needs and command premium pricing.

Nonetheless, the transition from successful clinical trials to market acceptance is complex, requiring robust marketing strategies and partnerships with healthcare providers. As such, these factors will be critical in translating clinical success into commercial viability.

Vancouver, Kelowna, and Delta, British Columbia--(Newsfile Corp. - July 17, 2024) - Investorideas.com, a go-to investing platform releases the first of a two-part series looking at biotech/biopharma stocks, featuring Citius Pharmaceuticals, Inc. (NASDAQ: CTXR), a late-stage biopharmaceutical company dedicated to the development and commercialization of first-in-class critical care products. The Company's diversified pipeline includes two late-stage product candidates.

Read the full article on Investorideas.com
https://www.investorideas.com/News/2024/biotech/07170Undervalued-Biotech-Stocks.asp

Looking at the sector, Morningstar reported in June, "Biotech had a strong start to 2024, driven by an uptick in M&A and every indication that interest rates would begin to decline," says Morningstar strategist Karen Andersen. "However, the second quarter has been more mixed for the industry, as rates look to be stabilizing rather than declining, given persistent (but improving) inflation. Higher rates tend to make waiting for uncertain returns on biotech investments less attractive."

"We still see tailwinds for the industry going forward. Smaller-cap names are still targets for acquisitions by bigger biopharma firms, and a wave of acquisitions has continued since late last year, particularly focused on oncology and immunology," she says. "We think obesity acquisitions are likely going forward, as big biopharma can bring development and commercialization expertise to multiple programs in midstage trials at small biotechs. Second, on a more fundamental level, new technologies and launches in new therapeutic areas are poised to boost productivity and drive biotech performance."

This week, EF Hutton initiated coverage of Citius Pharmaceuticals (NASDAQ: CTXR) with a Buy recommendation with a price target of $6.00. Analyst Jason Kolbert sees the stock as low risk - high reward based on their two late stage therapeutics, Mino-Lok and LYMPHIR. He also notes that a planned IPO for LYMPHIR this summer, in addition to an early August PDUFA should be catalysts to unlock value for Citius.

Mino-Lok (MLT), a novel antibiotic lock solution that combines minocycline, ethanol and edetate disodium, is designed to treat patients with catheter-related blood stream infections. Citius licensed Mino-Lok from an affiliate of The University of Texas MD Anderson Cancer Center. Mino-Lok is designed to offer an alternative to removing and replacing a central venous catheter (CVC), which may lead to a reduction in serious adverse events and cost savings to the healthcare system. If approved, Mino-Lok would be the first and only FDA-approved treatment that salvages central venous catheters that cause central line-related blood stream infections.

LYMPHIR is a recombinant fusion protein that combines the interleukin-2 (IL-2) receptor binding domain with diphtheria toxin fragments. The agent specifically binds to IL-2 receptors on the cell surface, causing diphtheria toxin fragments that have entered cells to inhibit protein synthesis. In 2011 and 2013, the FDA granted orphan drug designation to LYMPHIR for the treatment of PTCL and CTCL, respectively. In 2021, denileukin diftitox received regulatory approval in Japan for the treatment of CTCL and peripheral T-cell lymphoma (PTCL). Subsequently in 2021, Citius acquired an exclusive license with rights to develop and commercialize LYMPHIR in all markets except for Japan and certain parts of Asia.

In recent news from the company, Leonard Mazur, Chairman and CEO of Citius stated, "Our solid execution since the beginning of the year sets us up for potentially transformative catalysts in the coming months. Mino-Lok's strong Phase 3 topline results support its potential to become part of the standard of care for treating catheter-related bloodstream infections. Mino-Lok would also have a first and only advantage in a market with no approved or investigational products for salvaging infected central venous catheters. For LYMPHIR™, the FDA is currently reviewing our Biologics License Application, with an expected decision on August 13th. We are preparing for near-term commercialization of LYMPHIR if approved. These near-term catalysts should enable the company to optimize its current cash runway, future cash needs, as well as create potential non-dilutive cash opportunities."

In its most recent update, the company also discussed the pending IPO, reporting, "Citius plans to merge a wholly owned subsidiary with TenX Keane Acquisition to form publicly listed company, Citius Oncology, Inc. The transaction is pending review by the U.S. Securities and Exchange Commission (SEC) and TENK shareholder approval as well as contractual and customary closing conditions."

Looking at some of Morningstar's top biotech picks, they report, "These were the most undervalued biotech stocks that Morningstar's analysts cover as of June 5, 2024: Intellia Therapeutics ,Crispr Therapeutics ,Royalty Pharma ,Jazz Pharmaceuticals, Moderna, Ionis Pharmaceuticals, and Incyte.

Jazz Pharmaceuticals, with its diverse portfolio of marketed medicines, including leading therapies for sleep disorders and epilepsy, and a growing portfolio of cancer treatments made their list with them saying, "Jazz Pharmaceuticals is next on our list of affordable biotech stocks. Strong commercial launches for several products have continued to be Jazz's primary growth driver. Jazz Pharmaceuticals looks undervalued as it trades 44% below our fair value estimate of $187 per share..."

CRISPR Therapeutics AG, a biopharmaceutical company focused on creating transformative gene-based medicines for serious diseases, say it is, "Among our best biotech stocks to buy now, Crispr proved most resistant to the recent industry volatility. The company continues to possess a sizable, mostly early-stage pipeline, and it invests heavily in research and development."

CRISPR also made the Insider Monkey top ten biotech stocks list, which noted, "CRISPR Therapeutics AG is one of the more revolutionary medical companies since it is one of the few and one of the earliest players in the genetic sequencing industry. Estimates suggest that the market for CRISPR gene editing technologies can grow at a compounded annual growth rate of 22.3% between 2022 and 2027 to be worth an estimated $9.2 billion at the end of the forecast period. CRISPR Therapeutics AG's revenue was $370 million in 2023, leaving it with quite a bit of room to grow. Key to CRISPR Therapeutics AG's success though is the broader biotechnology industry's ability to commercialize treatments with its technology. These led to royalty payments, and one such payment came in Q1 from pharma giant Vertex Pharmaceuticals. Vertex's Casgevy is one of the few sickle cell disease treatments in the world, and its maker paid CRISPR Therapeutics AG $170 million in 2023 as a milestone payment. CRISPR Therapeutics AG, is eligible for another $130 million, and will also receive royalties from future treatments developed with its technology."

For investors getting a sense of the rankings, According to IBD, "The industry group has a Relative Strength Rating of 83, which has improved from 74 just a week ago, according to IBD Digital. This means the industry group now ranks in the top 17% of all industry groups in terms of 12-month performance."

On June 11^th, IBD reported, "Krystal Biotech stock cleared an important technical benchmark, seeing its Relative Strength (RS) Rating jump into the 90-plus percentile with an improvement to 91, up from 88 the day before."

On June 20^th, TimesSquare Capital Management, an equity investment management company, released its 'US Small Cap Growth Strategy' first-quarter 2024 investor letter. TimesSquare Capital US Small Cap Growth Strategy highlighted stocks like Krystal Biotech, Inc., in the first quarter 2024 investor letter. Krystal Biotech, Inc. is a commercial-stage biotechnology company that develops genetic medicines for patients with rare diseases. The one-month return of Krystal Biotech was 5.15%, and its shares gained 43.27% of their value over the last 52 weeks. On June 20, 2024, the stock closed at $171.21 per share with a market capitalization of $4.889 billion.

Krystal Biotech joined the S&P 600 Index on June 24^th.

Biotech stocks took center stage during Covid and as the sector continues to reinvent the future of health, they are still on the must watch list for analysts searching for an undervalued opportunity,

Research and find more biotech stocks at Investorideas.com
https://www.investorideas.com/BIS/Stock_List.asp

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FAQ

What is the price target for Citius Pharmaceuticals (CTXR) according to EF Hutton?

EF Hutton initiated coverage of Citius Pharmaceuticals (CTXR) with a Buy recommendation and a price target of $6.00.

What are the two late-stage product candidates of Citius Pharmaceuticals (CTXR)?

Citius Pharmaceuticals (CTXR) has two late-stage product candidates: Mino-Lok and LYMPHIR.

When is the expected FDA decision date for LYMPHIR by Citius Pharmaceuticals (CTXR)?

The FDA is expected to make a decision on LYMPHIR by Citius Pharmaceuticals (CTXR) on August 13th, 2024.

What is the Relative Strength Rating of the biotech industry group according to IBD?

According to IBD, the biotech industry group has a Relative Strength Rating of 83, ranking in the top 17% of all industry groups in terms of 12-month performance.