5 Beaten-Down Biotech Bets to Bounce Back in 2022
Fri, December 31, 2021, 7:50 PM
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Even though relentless efforts were made to contain the COVID-19 pandemic before 2021 bids adieu, the infection saw a renewed spike due to the latest Omicron variant. The deadly strain, suspected to be more contagious, again reminds investors of widespread lockdowns and economic doldrums.
However, the Biden administration is not yet mulling over the shutdown measures or stricter restrictions. This is expected to keep investors’ sentiments upbeat ahead of the new year.
Biotech companies are racing against time to evaluate every possible weapon in their arsenal to combat yet another wave due to the rapidly spreading Omicron variant. Any positive update in this regard led to a massive surge in the share price of the respective companies and drove the overall industry. The same trend is expected to continue, with booster doses of the vaccines and oral therapeutics becoming the need of the hour.
Apart from COVID-related solutions, many biotech companies are focused on developing new treatment options for other life-threatening or rare diseases. Shares of some biotech companies with promising pipeline candidates or drugs have declined through 2021 as investors’ focus primarily remained on those developing coronavirus vaccine or drugs. This created a good opportunity for investors to add some stocks to their portfolios that look promising at an attractive valuation. A few such companies are Aptose Biosciences APTO, Celularity CELU, CNS Pharmaceuticals CNSP, Celyad CYAD and Spruce Biosciences SPRB.
With several vaccines and drugs available for fighting the COVID-19, investors will now focus on companies with non-COVID pipelines that show a potential growth trajectory. Moreover, the second half of 2021 saw a considerable ramp-up in the M&A (mergers and acquisitions) activity with a few pharma giants acquiring smaller biotechs to bolster their pipelines with prospective candidates. Generally, M&A deals are done at a significant premium on current share price, creating opportunity for investors to record strong gains on investments.
5 Beaten-Down Stocks Likely to Make a Comeback in 2022
The robust resilience of stock markets has set the stage for a continued upside in 2022. Despite the Omicron variant spreading like wildfire, scientists believe it to be lesser virulent than the Delta variant and is unlikely to derail the global economy. This suggests that drug/biotech companies hurt by supply-chain disruptions may show signs of recovery in 2022 as supply-chain normalizes with lesser curbs. Visits to physician clinics are also likely to normalize next year with fewer checks in place, driving demand for physician-administered drugs.
However, finding stocks that are likely to outperform in 2022 can be a daunting task.
Here, Zacks’ proprietary methodology comes in handy. Our research shows that stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer good investment opportunities. You can see the complete list of today’s Zacks #1 Rank stocks here.
We picked five stocks with a market capitalization of more than $500 million that have lost above 20% so far in 2021 but have the potential to turn around next year based on their strong fundamentals.
Aptose: It a clinical-stage biotechnology company making advancements in therapeutics to treat life-threatening cancers, such as acute myeloid leukemia, high-risk myelodysplastic syndromes and other hematologic malignancies. APTO has three candidates in early-stage studies. Clinical study updates and initiations of new studies, anticipated in 2022, will be key catalysts for the stock.
Aptose currently has a Zacks Rank #2. APTO’s loss estimates for 2022 have narrowed 14% in the past 30 days.
Celularity: It is a clinical-stage biotechnology company developing off-the-shelf placental-derived allogeneic cell therapies targeting different indications, including cancer, infectious and degenerative diseases. CELU has all the pipeline candidates in early-stage studies. CELU is planning to initiate two phase I studies in 2022 to evaluate two different candidates in patients with Crohn’s disease or B-cell malignancies. Clinical updates will drive the stock in 2022.
Celularity carries a Zacks Rank of 2 at present. CELU’s loss estimates for 2022 have narrowed 15.6% in the past 30 days.
CNS Pharmaceuticals: It is a pre-clinical stage biotechnology company specialized in developing novel treatments for brain tumors. CNSP’s lead candidate berubicin is currently being evaluated in a phase II study that was initiated in the third quarter of 2021. Any promising study update on the candidate will drive share prices higher next year.
CNS Pharmaceuticals has a Zacks Rank of 2 at present. CNSP’s loss estimates for 2022 have narrowed 25% in the past 30 days.
Celyad: It is a biopharmaceutical company that develops and commercializes cell-based regenerative therapies to treat illnesses wherein cardiac tissue is lost due to chronic or acute injury. CYAD reported promising initial data from the ongoing studies during 2021, evaluating its two pipeline candidates, namely CYAD-02 and CYAD-211. The company initiated a new phase I study in December to evaluate another CAR T candidate, CYAD-101. Updates from these studies will be key drivers for the stock in 2022. Celyad is also planning to start a new early-stage study next year to evaluate a new candidate, CYAD-203.
Celyad is currently Zacks #2 Ranked. CYAD’s loss estimates for 2022 have narrowed 14.6% in the past 30 days.
Spruce Biosciences: It is a biopharmaceutical company focusing on the development and commercialization of novel therapies for rare endocrine disorders. SPRB is developing its sole pipeline candidate tildacerfont in two phase II studies as a potential treatment for classic congenital adrenal hyperplasia (CAH), a group of genetic disorders that affects the adrenal glands. Spruce Biosciences is planning to develop the drug for pediatric patients with CAH.
Spruce Biosciences carries a Zacks Rank #2 at present. SPRB’s loss estimates for 2022 have narrowed 11% in the past 30 days.
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