When an analyst initiates or upgrades a stock and accompanies that recommendation with a long term positive outlook a stock can see a considerable increase in its share price within just a few minutes of that note. With that said, I wanted to focus on two biotech stocks that were upgraded in the last 24 hours and some of the variables long term growth investors should consider.
Oncothyreon (ONTY) had its coverage initiated by Stifel Nicolaus who rated the company a "Buy" at current levels and set a $10.00/share price target. The Seattle, Washington based firm is a clinical-stage biopharmaceutical company, focuses on the development of therapeutic products for the treatment of cancer. Its primary product candidate, Stimuvax is in two Phase III clinical trials for the treatment of non-small cell lung cancer. The company is also developing PX-866, a small molecule that is in Phase II trials for various cancer indications. Stifel Nicolaus cited the "continued development of Stimuvax and the fact shares are down nearly 50% since March" as two catalysts that will act as the driving force behind the company's continued growth.
I agree that the continued development of Stimuvax is going be a key factor when it comes to the success of ONTY, but my eyes are also going to be on the FDA and any indication they may make with regard to Stimuvax. Although the company does not currently generate any revenue the revenue potential if Stimuvax receives an FDA approval is certainly an incentive to establish a small position in the company at current levels. Over the last four quarters ONTY has demonstrated a very scattered EPS trend, but once Stimuvax is approved and comes to market that trend will demonstrate a clear upward trend and a positive consistency.
Threshold Pharmaceuticals (THLD) had its coverage initiated by Stifel Nicolaus who rated the company a Buy at current levels and set a $13.00/share price target. The San Francisco, California based firm a development stage company, focuses on the discovery and development of drugs for the microenvironment of solid tumors and the bone marrows of hematologic malignancies as novel treatments for patients living with cancer. Its clinical development products include TH-302, a novel drug candidate, which is in Phase I, Phase II, and Phase III clinical trials for the severe hypoxic regions present in various solid tumors and hematologic malignancies. Analysts at Cowen recently noted that if potential shareholders consider the potential of TH-302, THLD is considerably undervalued. That said, I think if the FDA approves TH-302 as a multifaceted drug, we could THLD surpass not only the $13.00/share price target but easily begin to trade at the $16/share - $18/share range.
Potential investors looking to establish a position in either ONTY or THLD should do so with a small to moderate position and add to that position as both continued drug developments and earnings announcements approach. ONTY and THLD have very promising pipelines and I'd not only keep an out for drug related announcements but I'd also watch for any positive indication from the FDA.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.