2 Biotech Stocks Wall Street Predicts Will Triple in Value

After a hot start to 2021, biotech stocks have been recently lagging, with the SPDR S&P Biotech ETF (XBI) down 10% year-to-date (YTD). I view this pullback as an opportunity for investors.

There are many biotech companies, while still in the research and development phase, that have strong drug candidates in their pipelines.  You just need to know where to find them.

Today, we will take a look at two biotech stocks, namely Berkeley Lights Inc. (BLI) and Medicenna Therapeutics Corp. (MDNA), which according to the consensus of Wall Street analysts could deliver a 200% upside from where they are currently trading.

Berkeley Lights Inc. (BLI)

BLI is a biotech company developing and using micro-droplet optofluidic technology to locate and culture individual cells for biomedical research. With this technology, BLI will be able to monitor the reactions to experimental drugs in real-time, accelerating the development of cell and gene therapy products. BLI also develops its Berkeley Lights Platform, a fully integrated, end-to-end solution, consisting of consumables, including its OptoSelect chips and reagent kits, advanced automation systems, and advanced application and workflow software that should drive its recurrent revenues going forward.

Since the beginning of the year, the shares of BLI plunged 77.9%, significantly underperforming the market.

This steep depreciation has not scared the likes of Cathie Woods, the founder and CEO of Ark Invest to recently strengthen its positioning on this pioneer of digital cell biology, on both ARK Genomics ETF(ARKG) and ARK Innovation ETF (ARKK).

BLI’s financial picture has improved in the past years, as the company managed to lift net sales to $910m in 2021, up 41.5% year-on-year. Going forward, analysts are expecting a steep decline of its top line, and revenues should hit $131m in 2022, down a whopping 85.6% year-on-year.

On the other hand, BLI’s net income is expected to reach a bottom in 2021, with a net loss of $636m during the year, compared to a loss of $416m in 2020, somewhat explaining the poor stock performance of the company.

The digital cell biology specialist has an expected net cash position of $166m in 2021, which should shrink by 22.3% in 2022 to $129m. Despite its reduced cash, the company continues to sustain its research and development, following rising Capex expectations, which should reach $550m in 2022, up 12.2% year-on-year.

Moreover, the consensus of Wall Street analysts is bullish on BLI’s equity story. With four buy recommendations out of five analysts tracking the stock, the biotech company has an average 12-month price target of $73 per share, corresponding to an upside of 256.62%.

After losing more than half of its market capitalization, BLI’s valuation still trades at a high 2022e P/B ratio of 7.85x but remains relatively cheap in terms of 2022e EV/Revenue, which stands at 9.54x.

Medicenna Therapeutics Corp. (MDNA)

MDNA is a clinical-stage immune-oncology company, engaged in the development and commercialization of interleukin-2 (IL-2), interleukin-4 (IL-4), and interleukin-13 (IL-13) tunable cytokines, called Superkines and Empowered Superkines (ECs). It focuses on the commercialization of EC and Superkines for the treatment of cancer and other diseases. The company’s product candidates are MDNA55 and MDNA11, respectively a cure to prevent a fatal form of brain cancer and a therapeutic for various solid tumors in combination with other immunotherapies.

MDNA’s shares dipped 43.5% year-to-date, underperforming the iShares Biotechnology ETF (IBB), which advanced 6.5% since the beginning of the year.

MDNA has not delivered any revenue since its listing. However, next year analysts are expecting that the company should hit the market with its first products, generating CAD 13m in net sales. Like many other biotech companies in clinical trials, MDNA has consistently burned cash in the last years and is expected to reach a yearly loss of CAD 249m in 2022, down from CAD 173m the prior year.

The company had CAD 34m in cash in August 2021, compared to CAD 67.3m the prior year. The immunotherapy company has issued new shares to sustain its research and development programs, which has diluted shareholders and inevitably brought renewed doubts on the company’s ability to deliver its product candidates to the market.

Nevertheless, MDNA’s research and development is funded through the end of 2022. The immune-oncology company is well-positioned to ensure the continued advancement of its clinical trials and the evaluating of its most advanced candidate, the MDNA55 which is targeting glioblastoma, a fatal form of brain cancer, should generate value for patients and shareholders in the next quarters.

In addition, analysts covering MDNA have all a buy recommendation for the immunotherapy specialist, offering a 12-month average price target of $8.23 per share, representing a 210.44% change from the last traded price.

Despite that, MDNA trades at higher valuation metrics than BLI, with a 2022e P/B ratio of 11.5x and a 2022e EV/Revenue of 44.4x.

Conclusion

Wall Street analysts believe that these two innovative stocks constitute a buying opportunity at current prices. Both companies are hoping to deliver cutting-edge products and therapies that could generate a 3x appreciation of their respective share price.