What is more critical for the health of the stock market than the result of the presidential election? A COVID-19 vaccine, says Goldman Sachs.
With earnings season getting underway for the third quarter this week, the company believes the fundamentals impact of the virus should be at the center, as opposed to the White House race. “The vaccine is more important than the election result to the path of stocks … The consequences of the half-frozen economy on an uneven path to recovery will affect third quarter results,” commented David Kostin, US equity strategist for Goldman Sachs .
Although elections are a source of uncertainty, Goldman Sachs analysts found only a 4% difference in EPS if President Trump is re-elected or the Democrats are ahead. Based on the company’s analysis, an increase in household spending, partly financed by higher tax revenues, would “fuel economic growth and help offset the headwinds on profits from high tax rates.”
With that in mind, we turned our attention to two stocks that Goldman Sachs believes have oversized growth prospects, with the company’s analysts forecasting at least 90% upside potential for each stock. Using TipRanks databaseWe found that both tickers also have a consensus rating of “Strong Buy” from the rest of the street.
Athira Pharma (ATHA)
Athira Pharma applies cutting-edge approaches to neurodegenerative diseases and aims to improve the lives of patients around the world. Given the potential of his fortune in Alzheimer’s disease (AD), Goldman Sachs slams the table.
ATHA made its public debut on September 18th. The first trade was 17.4% above the IPO price. For $ 204 million, the company sold 12 million shares instead of the 10 million originally expected.
Writing for Goldman Sachs, Analyst Graig Suvannavejh refers to its lead candidate ATH-1017, a low molecular weight activator from HGF / MET that is currently being investigated in a phase 2/3 study for the treatment of mild to moderate AD as a key component of its bullish thesis.
The analyst does not deny that AD is a difficult indicator to deal with, but does tell clients that he has high hopes for ATHA. “We are fully aware of the history of AD drug development and its well-documented past with high failure rates. Therefore, AD-focused companies like ATHA should be classified as high risk. However, as there is still a significant shortage of effective AD drugs , we think alternative approaches to treating AD are useful, ”he said.
In the past, the most common therapeutic approaches for AD have been those that have centered on the assumption that the accumulation of disease-causing proteins in the brain leads to AD. However, AD therapeutics based on targeting amyloid have all failed to demonstrate their effectiveness in clinical trials, with monoclonal antibody (mAb) approaches that target tau, another protein that aggregates in the brains of AD patients, also fail.
ATHA’s differentiated approach makes it a standout product, according to Suvannavejh. The Therapy Mechanism of Action (MOA) is based on the HGF / MET agonism, a strategy that has not yet been investigated in AD. In addition, Suvannavejh argues that the FDA’s recent decision to review Biogen’s aducanumab for approval, despite being prematurely discontinued in two large Phase 3 trials due to futility, is a “sign of positive regulatory background”.
Additionally, the company is applying a new way of thinking to AD clinical trials. It will use a non-traditional technique (EEG) to measure improvements in the brains of AD patients and a novel endpoint for clinical trials (Global Statistical Test / GST) that will assess effectiveness. It is based on both the ERP biomarker and more traditional effectiveness measures (e.g. ADAS-Cog).
Suvannavejh added, “Given this completely innovative mindset, we feel it is important to acknowledge that the FDA has already approved ATHA’s novel clinical study plan – which also significantly reduces the time and cost associated with AD drug development. Given our belief that the FDA may have urgent need to get new AD therapeutics into the hands of patients, their caregivers, and physicians, we believe the time is right for a candidate like ATH-1017. ”
In terms of the sales potential of ATH-1017, neurodegenerative diseases represent one of the highest areas of unmet medical need, according to Suvannavejh. It is estimated that more than 5 million people over 65 in the US have AD. According to studies by the Alzheimer’s Association, this number is expected to almost triple by 2050. To this end, the analyst predicts peak risk-adjusted sales in 2035 of $ 10.8 billion.
Everything ATHA has done convinced Suvannavejh to initiate coverage with a buy rating. On top of the call, he also set a target price of $ 53, indicating an upside of 189%. (To see Suvannavejh’s track record, Click here)
After the collapse of the consensus, opinions are far from mixed. With 4 purchases and no holds or sells in the past three months, the word on the street is that ATHA is a strong buy. At $ 42.50, the average target price implies an upside of 132%. ((See Athira Pharma stock analysis on TipRanks)
Denali Therapeutics (DNLI)
Dedicated to combating neurodegenerative diseases through consistent therapeutic development, Denali Therapeutics is drawing a lot of attention on Wall Street. Goldman Sachs has high hopes before the key data is read.
As the company prepares to report initial proof-of-concept biomarker data for DNL310 in Hunter Syndrome from YE20, the company Salveen Richter likes what she sees.
DNL310 is a recombinant form of the IDuronate-2-sulfatase (IDS) enzyme that uses Denali enzyme transport vehicle (ETV) technology to cross the blood-brain barrier (BBB) and allow large molecules to be transported into the brain .
DNLI is expected to publish initial data from Cohort A, and management expects the 3 mg / kg starting dose to reduce CSF-GAGs by 50% after eight weeks. A second cohort B will evaluate DNL310 in a wider range of patients, with the dose increase based on the results of cohort A. Richter points out that a 50% reduction in CSF GAGs was associated with a decrease in lipid lysosome and neurofilament light chain (NfL) accumulations associated with neuronal degeneration and injury.
“While this is the first in-human study for DNL310, we see the preclinical data as strongly supportive of the expected therapeutic benefits and the potential for CSF GAG reduction to drive downstream changes in lysosomal lipid and NfL accumulation (ie to prevent neural dysfunction and injury) for improved cognition and function, ”commented Richter.
It should be noted that the preclinical and early clinical data for JR-141 from JCR Pharmaceuticals, a BBB-penetrating fusion protein that also uses receptor-mediated transcytosis to deliver iduronate-2-sulfatase (I2S) to the brain, the Risk-jeopardizing approach, in Richter’s opinion.
To that end, the five-star analyst believes positive DNL310 biomarker data could serve as a proof-of-concept for DNLI’s transport vehicle (TV) technology. The modularity of the platform could enable the transport of various large molecules across the BBB for a number of other neurodegenerative indications such as Parkinson’s (PD) and frontotemporal dementia (FTD).
Additionally, DNLI could leverage this delivery platform for antibodies, proteins, or enzymes that are not currently in its own portfolio and, according to Richter, increase interest in Biogen’s assets.
In line with their optimistic approach, Richter stayed with the bulls and repeated a buy recommendation. She also raised the price target from $ 41 to $ 60. Investors could pocket a 36% gain if that goal is met in the next twelve months. (To see Richter’s track record, Click here)
Looking at the consensus breakdown, there have been 6 buys and 2 holds issued in the past three months. Therefore, DNLI receives a strong buy consensus rating. Based on the average price target of $ 51.17, stocks could rise 16% over the next year. ((See Denali Therapeutics stock analysis on TipRanks)
Disclaimer: The opinions expressed in this article are solely those of the analysts presented. The content is intended to be used for informational purposes only. It is very important that you do your own analysis before making any investment.