Stock markets have been rising steadily from their ‘corona trough’ in the spring of last year – that’s no secret, in fact, it’s been a huge boon for investors. Stocks have consistently shown the best returns, as central banks have been holding rates low. But there’s been an unintentional consequence of the stock boom, one that wasn’t foreseen but has given a boost to both companies and investors alike. The sustained gains in stocks has encouraged a surge in IPO activity. Companies are taking advantage of the upward market trends to enter the public markets and raise capital.
The surge in IPOs is still going on, and this past summer was especially hot. In Q3, covering July, August, September, US markets saw 94 IPOs raise a total of $27 billion, for the strongest third-quarter IPO activity since 2000.
The solid momentum in IPO activity is attracting attention from Wall Street analysts, who are looking under the hoods of the newly public companies to find the ones that truly deserve investors’ money.
Using the TipRanks database, we identified three such stocks that have received overwhelmingly bullish praise from the Street, enough to earn a “Strong Buy” analyst consensus. Not to mention each offers up substantial upside potential, as some analysts see them surging over 60%.
Tenaya Therapeutics (TNYA)
We’ll start with Tenaya Therapeutics, a biotech company seeking new curative therapies to treat the underlying causes of heart disease. This is a vital niche in medicine, as even in today’s COVID-climate, heart disease remains the leading cause of death among adults worldwide. Tenaya is pursing research paths in gene therapy, cellular regeneration, and precision medicine to achieve its goal.
The company has five drug candidates in its research pipeline, all in preclinical stages of development. Three candidates are part of the gene therapy platform, one is part of the precision medicine approach, and one follows the cellular regeneration path. Tenaya expects to file Investigational New Drug applications – the regulatory step required before conducting human clinical trials – for TN-201 and TYA-11631 during 2022. The first of these drug candidates, TN-201, targets genetic hypertrophic cardiomyopathy, and the second, TYA-11631, targets heart failure with preserved ejection fraction, or diastolic heart failure. These two conditions have well over 3 million potential patients between them, in the US alone.
In recent updates on these two research programs, the company reported meeting important milestones. TN-201 was granted Orphan Drug Designation by the FDA earlier this year, and the preclinical data is positive, and will be used to justify the upcoming IND application. And, in July of this year, the company released preclinical data on TYA-11361 that showed improved cardiac function in animal models.
Turning to the IPO, Tenaya’s stock started trading on the NASDAQ on July 31, with an initial price of $15 per share. The stock closed its first day at $15.35 and has gained 42% since then. The IPO saw 13.8 million shares go on the market, and raised $207 million in gross proceeds.
Covering this new stock for Piper Sandler, analyst Yasmeen Rahimi sees reason for optimism. Rahimi gives TNYA an Overweight (i.e. Buy) rating, along with a $40 price target. The analyst, therefore, expects the stock to climb ~80% over the coming months. (See Rahimi’s track record, click here)
Backing her stance, Rahimi writes: “TNYA is uniquely positioned with a robust end-to-end platform from target identification to large scale manufacturing… TNYA has immense know-how in AAV engineering (>1 billion capsids identified) that we believe could address key issues of tissue tropism, transduction, and neutralizing antibodies. Additionally, we are encouraged by TNYA’s internalized process, which is capable of supporting small to large scale manufacturing, providing significant competitive advantage.”
Overall, all four of the recent analyst reviews on this stock are positive, showing that Wall Street sees this company in a solid position to give returns on investment. The shares are selling for $21.89 and the average price target of $36 implies a one-year upside of 64%. (See TNYA stock analysis on TipRanks)
Eliem Therapeutics (ELYM)
Next up is Eliem Therapeutics, a biotech company that focuses on the development of new therapies to treat unmet medical needs in neuronal excitability disorders affecting the central and peripheral nervous system.
Two of Eliem’s drug candidates, ETX-810 and ETX-155, are in clinical trials. ETX-810 is currently undergoing two Phase 2a trials, testing its efficacy in the treatment of diabetic neuropathic pain and lumbosacral radicular pain (sciatica). Topline data is expected in both of these studies in the first half of next year. ETX-155, the other clinical-stage candidate, is undergoing three Phase 1 studies for the treatment of depression and seizures. Specifically, the clinical trials for ETX-155 target Major Depressive Disorder, Perimenopausal depression, and focal onset seizures. Initial results from the seizure study are expected in 1H22, while the other two studies are expected to show results starting in the first half of 2023.
The other major development for Eliem this past summer was the IPO. On August 10, the company raised $92 million in gross proceeds from its initial public offering, which saw the sale of 7.36 million shares of common stock. The initial price was $12.50 per share, and after deductions for the underwriting expenses, the company netted $83.1 million in new capital. The stock closed its first day at $15.90 and has gained 18% since then.
Covering Eliem for Guggenheim, analyst Yatin Suneja sees ETX-155 as the key factor. He writes: “We believe the GABA mechanism of action in treating depressive disorders has been significantly de-risked by data from SAGE and PRAX. Additionally, our review of the current data suggests that ETX-155, relative to competitors, may improve on the: (1) efficacy (based on the drug activity on the synaptic vs. extra synaptic GABA receptors), (2) tolerability and safety, and (3) a more optimal dosing scheme, based on the lack of food effect and long half-life (vs. competitors).”
The analyst continued, “While significantly behind the competition (SAGE), both the depression and epilepsy markets are large with room for multiple novel GABA-acting drugs, in our view. We are currently modeling ETX-155 peak U.S. sales of >$1.1B (risk-unadjusted) in depressive disorders.”
Suneja’s comments support his Buy rating on the stock, and his $32 price target implies it has 68% upside potential for the next 12 months. (To watch Suneja’s track record, click here)
Overall, this stock gets a unanimous Strong Buy analyst consensus rating, based on 4 recent positive reviews. The shares are currently trading for $19 and their $33.33 average price target is slightly more bullish than Suneja’s view, suggesting an upside of 75% in the year ahead. (See ELYM stock analysis on TipRanks)
Adagio Therapeutics (ADGI)
Last on our list is Adagio Therapeutics, is a biopharmaceutical company taking full advantage of the state of current events, not just to go public but also to inform its research focus. The company is working on anti-body based anti-viral medications to treat COVID-19, as well as to form a foundation for future potential treatments of viral diseases with pandemic potential. Adagio believes that COVID-19 will become an endemic disease, like the flu, but that it can be controlled by medical agents for both prevention and treatment.
Adagio’s leading drug candidate, ADG20, is designed to target the full genetic code of SARS-CoV-2, the virus that causes COVID-19, rather than just the spike protein targeted by current vaccines. As such, it is hoped that ADG20 may provide a stronger, more durable preventative effect when administered as a vaccine, as well as a stronger treatment when given after infection. ADG20 is currently undergoing the Phase 2/3 STAMP trial of its treatment effects, and the Phase 2/3 EVADE trial as a preventative.
In September, Adagio released Phase 1 data, from earlier studies of ADG20, showing acceptable tolerability of the drug candidate by patients. Early data such as this has supported the dosing strategy of the later-stage, global clinical trials.
Shares in Adagio hit the public market on August 6, when they opened on the NASDAQ at a share price of $17. The stock closed on its first day at $20.88 and has since gained 28% from that level. The company sold 18.2 million shares in the IPO, and raised $355.8 million in gross proceeds.
In his coverage of this stock for Jefferies, analyst Michael Yee sees a clear advantage for ADG20, writing, “We believe shares of ADGI are likely to appreciate over the next 12-18 months on positive Phase III data for the company’s lead antibody ADG20 for the treatment and prevention of COVID-19… In our view, Phase III data for other antibodies (e.g., LLY, REGN, AZN) partially derisk ADGI’s Phase III studies…”
The analyst added, “We think there is room for upside from the current $6B cap considering a 3-4x multiple on $3B in peak sales, equates to $9-12B mkt cap…”
To this end, Yee rates ADGI a Buy, and his $60 price target indicates potential for a robust 125% upside this year. (To watch Yee’s track record, click here)
Like the other stocks on this list, Adagio has a Strong Buy consensus rating. The 4 recent analyst reviews include 3 to Buy and 1 to Hold, and the average price target of $47.50 implies a one-year upside of ~79% from the trading price of $26.57. (See ADGI 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.