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 most recently and some of the variables long-term growth investors should consider.
Meridian Bioscience (VIVO) had its coverage initiated by Craig Hallum who rated the company a "Buy" at current levels and set a $24.00/share price target. According to Yahoo! Finance, the Cincinnati, Ohio based firm is "a life science company that engages in the development, manufacture, sale, and distribution of diagnostic test kits primarily for gastrointestinal, foodborne, viral, respiratory, and parasitic infectious diseases. The company's diagnostic products primarily consist of C. difficile for the detection of gastrointestinal diseases; Rotavirus and Adenovirus products for pediatric diarrhea detection; H. pylori for stomach ulcers; Enterohemorrhagic E. coli infection and Campylobacter jejuni used in the detection of foodborne diseases; Varicella-Zoster for viral diseases; and Cytomegalovirus for organ transplant infections".
I think that the continued development of the company's diagnostic testing kits is going be a key factor when it comes to the success of VIVO, but many investors should also examine the company's fundamentals over the last 12 months. If we examine the company's profit (18.40%) and operating margins (28.76%) we'll notice that it clearly trumps some of the bigger biotech names in the sector such as Merck (MRK), which only managed to demonstrate a profit margin of 13.93% and an operating margin of 22.97%.
AcelRx Pharmaceuticals (ACRX) had its coverage initiated by Canaccord Genuity, who rated the company a Buy at current levels and set an $8.00/share price target. The Redwood City, California-based company is "a development stage specialty pharmaceutical company, focuses on the development and commercialization of therapies for the treatment of acute and breakthrough pain. The company is developing its lead product candidate, ARX-01, which is a Sufentanil NanoTab PCA system that is in Phase III clinical trials for acute post-operative pain".
Analysts at Canaccord recently noted ""We're assuming coverage of AcelRx and setting a price target of $8 ahead of key data that could boost confidence in lead drug ARX-01 for post-operative analgesia using the company's transmucosal sufentanil-based drug device therapy," analyst Randall Stanicky said. "Market potential is sizable and we like the risk/reward, for those with risk appetite, ahead of important year-end data. Focus on the Phase III data comparator data to IV PCA morphine, the current standard of care, as the key catalyst which we expect over the next month or so." If the company can present positive year-end data in terms of both earnings and clinical data we could see some very significant upside. If the data or year expectations come in-line or below what analysts are expecting, the stock could fall as low as $1.75/share.
Potential investors looking to establish a position in either VIVO or ACRX should do so with a small to moderate position and add to that position, as both continued drug developments and earnings announcements approach. VIVO and ACRX 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 in the very near future.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.