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These 2 Small-Cap Stocks Could See 50%-Plus Gains, Says Canaccord

These 2 Small-Cap Stocks Could See 50%-Plus Gains, Says Canaccord

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In this time of pandemic, stock markets have mostly been – rising. Yes, we had a crash in February/March, part of that initial ‘panic mode’ when Federal, state, and local governments shut down economic activity and ordered social lockdown policies, but that turned around at the end of March. We’ve had a bullish rally since then. The S&P 500 stands just above 3,200, only 4.5% below its all-time peak.

With this in mind, Canaccord's Chief US Strategist Tony Dwyer looked at some historical data, and found that when over 90% of the S&P 500 components trade above their 50-day moving averages for at least ten straight days, the market usually moves sideways for multiple weeks, with the trend sometimes persisting for up to three months.

“Ultimately, such consolidation periods following these breadth-thrust ramps studied take place early in a new bull market and are resolved to the upside. Our tactical game plan since June 5 has been to add risk when the market moves back down to SPX 3000, and we have used the two opportunities to do just that,” Dwyer noted.

Using Dwyer’s strategy to provide concrete recommendations, Canaccord’s top analysts have honed in on two small-caps, stocks with market caps of less than $400 million, poised to post big gains in the coming months. After running the tickers through TipRanks’ database, it’s clear the names are also getting support from the rest of the Street.

CRH Medical Corporation (CRHM)

Serving the Gastroenterology (GI) community, CRH Medical provides physicians with a wide range of products designed to improve the procedural experience. The company, which sports a market cap of only $166 million and $2.30 share price, has earned Canaccord’s praise thanks to its impressive pipeline and strong M&A strategy.

Representing the firm, 5-star analyst Richard Close points out that company has been making headway on the acquisition front. Throughout the pandemic, management has been continuing discussions with M&A targets.

“The pipeline has actually grown during this time given that more GI's had free time due to reduced volume and were available to discuss M&A opportunities. We believe this could bode well for an acceleration of deals in 2021,” Close noted.

Speaking to these efforts, three purchases were made by the company during COVID. Along with the acquisition of a 75% stake in Lake Lanier Anesthesia Associates, which could see annualized revenue of $2.7 million, and its start-up joint venture with a 51% ownership in Oconee River Anesthesia Associates, CRHM revealed it had snapped up a 75% stake in Metro Orlando Anesthesia Associates, a company that provides services to one ASC in Orlando. Metro Orlando Anesthesia is set to generate $1.9 million in annualized revenue.

Weighing in on these buys, Close commented, “We did not expect the company to resume acquisitions so quickly, having already completed three transactions in June. We are encouraged by the company's quick rebound and now have a positive outlook for our 2020E forecasts considering we had no acquisitions forecasted in our model for the rest of 2020.”

Reflecting another positive, the company is pursuing contracted status for those payer relationships that are currently non-contracted, and even though the crisis delayed these discussions, CRHM remains committed to pushing for on-contract rates. “Getting through this process will remove an overhang on the stock that has created variability in results over the last several years,” Close stated.

In line with his optimistic take, Close rates CRHM a Buy along with a $3.50 price target. A twelve-month gain of 52% could be in store, should the analyst’s thesis play out in the year ahead. (To watch Close’s track record, click here)      

Similarly, the rest of the Street is getting onboard. 4 Buy ratings and 1 Hold assigned in the last three months add up to a Strong Buy analyst consensus. In addition, the $3.37 average price target puts the potential gain at 46%. (See CRHM stock analysis on TipRanks)

Amryt Pharma (AMYT)

Boasting a market cap of $364.9 million, Amryt Pharma develops therapies that could potentially improve the lives of patients with rare, debilitating conditions. With operational tailwinds set to propel it forward, it’s no wonder Canaccord gave it a thumbs up.

5-star analyst Michelle Gilson points to AMYT’s expanding base business as being a key component of her bullish thesis. She highlights that lomitapide, which is approved in the U.S. and EU for homozygous familial hypercholesterolemia (HoFH), drove revenues of $45 million in Q1 2020 and metreleptinm, its asset for generalized lipodystrophy (GL) and partial lipodystrophy (PL), generated $157 million in 2019. It should also be noted that AMYT achieved adjusted EBITDA profitability and cash flow positivity in Q1, demonstrating the build-out of a more efficient infrastructure following the acquisition of Aegerion has been effective, in the analyst’s opinion.

“With a strengthened B/S to support the new business model (reduced debt burden, increased cash with equity raise), the Amryt team has been able to focus on and invest in the EU launch of metreleptin and re-establishment of medical affairs to reduce unnecessary discontinuations, which should support continued organic growth,” Gilson explained.

In addition, the company has placed a significant focus on expanding the labels for these two drugs. Gilson told clients, “Studies are underway/planned for metreleptin in PL (U.S.), lomitapide in familial chylomicronemia syndrome (FCS), and lomitapide in pediatric HoFH... If successful, these indications could double the market opportunity in the US for metreleptin and WW for lomitapide.”

When it comes to Filsuvez (AP101), its topical therapeutic designed for use in epidermolysis bullosa (EB), Gilson also sees a major opportunity. Filsuvez has already shown that it can speed up healing times in partial thickness wounds, so the analyst has high hopes ahead of the Phase 3 data readout, which is slated for late Q3 or early Q4. As such, this event could be an important near-term catalyst. If that wasn’t enough, the company’s pipeline includes a polymer-based, topical gene therapy platform, with the lead candidate, AP103, for dystrophic EB expected to enter clinical development in 2H21.   

Based on all of the above, Gilson rates AMYT a Buy rating, along with a $40 price target. This figure implies shares could soar 269% in the next year. (To watch Gilson’s track record, click here)

AMYT has stayed relatively under-the-radar, with its Moderate Buy consensus rating breaking down into 2 Buys and no Holds or Sells. At $42.50, the average price target indicates upside potential in the shape of a whopping 287%. (See AMYT stock analysis on TipRanks)

To find good ideas for small-cap stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

The post These 2 Small-Cap Stocks Could See 50%-Plus Gains, Says Canaccord appeared first on TipRanks Financial Blog.

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Four burning questions about the future of the $16.5B Novo-Catalent deal

To build or to buy? That’s a classic question for pharma boardrooms, and Novo Nordisk is going with both.
Beyond spending billions of dollars to expand…

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To build or to buy? That’s a classic question for pharma boardrooms, and Novo Nordisk is going with both.

Beyond spending billions of dollars to expand its own production capacity for its weight loss drugs, the Danish drugmaker said Monday it will pay $11 billion to acquire three manufacturing plants from Catalent. It’s part of a broader $16.5 billion deal with Novo Holdings, the investment arm of the pharma’s parent group, which agreed to acquire the contract manufacturer and take it private.

It’s a big deal for all parties, with potential ripple effects across the biotech ecosystem. Here’s a look at some of the most pressing questions to watch after Monday’s announcement.

Why did Novo do this?

Novo Holdings isn’t the most obvious buyer for Catalent, particularly after last year’s on-and-off M&A interest from the serial acquirer Danaher. But the deal could benefit both Novo Holdings and Novo Nordisk.

Novo Nordisk’s biggest challenge has been simply making enough of the weight loss drug Wegovy and diabetes therapy Ozempic. On last week’s earnings call, Novo Nordisk CEO Lars Fruergaard Jørgensen said the company isn’t constrained by capital in its efforts to boost manufacturing. Rather, the main challenge is the limited amount of capabilities out there, he said.

“Most pharmaceutical companies in the world would be shopping among the same manufacturers,” he said. “There’s not an unlimited amount of machinery and people to build it.”

While Novo was already one of Catalent’s major customers, the manufacturer has been hamstrung by its own balance sheet. With roughly $5 billion in debt on its books, it’s had to juggle paying down debt with sufficiently investing in its facilities. That’s been particularly challenging in keeping pace with soaring demand for GLP-1 drugs.

Novo, on the other hand, has the balance sheet to funnel as much money as needed into the plants in Italy, Belgium, and Indiana. It’s also struggled to make enough of its popular GLP-1 drugs to meet their soaring demand, with documented shortages of both Ozempic and Wegovy.

The impact won’t be immediate. The parties expect the deal to close near the end of 2024. Novo Nordisk said it expects the three new sites to “gradually increase Novo Nordisk’s filling capacity from 2026 and onwards.”

As for the rest of Catalent — nearly 50 other sites employing thousands of workers — Novo Holdings will take control. The group previously acquired Altasciences in 2021 and Ritedose in 2022, so the Catalent deal builds on a core investing interest in biopharma services, Novo Holdings CEO Kasim Kutay told Endpoints News.

Kasim Kutay

When asked about possible site closures or layoffs, Kutay said the team hasn’t thought about that.

“That’s not our track record. Our track record is to invest in quality businesses and help them grow,” he said. “There’s always stuff to do with any asset you own, but we haven’t bought this company to do some of the stuff you’re talking about.”

What does it mean for Catalent’s customers? 

Until the deal closes, Catalent will operate as a standalone business. After it closes, Novo Nordisk said it will honor its customer obligations at the three sites, a spokesperson said. But they didn’t answer a question about what happens when those contracts expire.

The wrinkle is the long-term future of the three plants that Novo Nordisk is paying for. Those sites don’t exclusively pump out Wegovy, but that could be the logical long-term aim for the Danish drugmaker.

The ideal scenario is that pricing and timelines remain the same for customers, said Nicole Paulk, CEO of the gene therapy startup Siren Biotechnology.

Nicole Paulk

“The name of the group that you’re going to send your check to is now going to be Novo Holdings instead of Catalent, but otherwise everything remains the same,” Paulk told Endpoints. “That’s the best-case scenario.”

In a worst case, Paulk said she feared the new owners could wind up closing sites or laying off Catalent groups. That could create some uncertainty for customers looking for a long-term manufacturing partner.

Are shareholders and regulators happy? 

The pandemic was a wild ride for Catalent’s stock, with shares surging from about $40 to $140 and then crashing back to earth. The $63.50 share price for the takeover is a happy ending depending on the investor.

On that point, the investing giant Elliott Investment Management is satisfied. Marc Steinberg, a partner at Elliott, called the agreement “an outstanding outcome” that “clearly maximizes value for Catalent stockholders” in a statement.

Elliott helped kick off a strategic review last August that culminated in the sale agreement. Compared to Catalent’s stock price before that review started, the deal pays a nearly 40% premium.

Alessandro Maselli

But this is hardly a victory lap for CEO Alessandro Maselli, who took over in July 2022 when Catalent’s stock price was north of $100. Novo’s takeover is a tacit acknowledgment that Maselli could never fully right the ship, as operational problems plagued the company throughout 2023 while it was limited by its debt.

Additional regulatory filings in the next few weeks could give insight into just how competitive the sale process was. William Blair analysts said they don’t expect a competing bidder “given the organic investments already being pursued at other leading CDMOs and the breadth and scale of Catalent’s operations.”

The Blair analysts also noted the companies likely “expect to spend some time educating relevant government agencies” about the deal, given the lengthy closing timeline. Given Novo Nordisk’s ascent — it’s now one of Europe’s most valuable companies — paired with the limited number of large contract manufacturers, antitrust regulators could be interested in taking a close look.

Are Catalent’s problems finally a thing of the past?

Catalent ran into a mix of financial and operational problems over the past year that played no small part in attracting the interest of an activist like Elliott.

Now with a deal in place, how quickly can Novo rectify those problems? Some of the challenges were driven by the demands of being a publicly traded company, like failing to meet investors’ revenue expectations or even filing earnings reports on time.

But Catalent also struggled with its business at times, with a range of manufacturing delays, inspection reports and occasionally writing down acquisitions that didn’t pan out. Novo’s deep pockets will go a long way to a turnaround, but only the future will tell if all these issues are fixed.

Kutay said his team is excited by the opportunity and was satisfied with the due diligence it did on the company.

“We believe we’re buying a strong company with a good management team and good prospects,” Kutay said. “If that wasn’t the case, I don’t think we’d be here.”

Amber Tong and Reynald Castañeda contributed reporting.

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Petrina Kamya, Ph.D., Head of AI Platforms at Insilico Medicine, presents at BIO CEO & Investor Conference

Petrina Kamya, PhD, Head of AI Platforms and President of Insilico Medicine Canada, will present at the BIO CEO & Investor Conference happening Feb….

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Petrina Kamya, PhD, Head of AI Platforms and President of Insilico Medicine Canada, will present at the BIO CEO & Investor Conference happening Feb. 26-27 at the New York Marriott Marquis in New York City. Dr. Kamya will speak as part of the panel “AI within Biopharma: Separating Value from Hype,” on Feb. 27, 1pm ET along with Michael Nally, CEO of Generate: Biomedicines and Liz Schwarzbach, PhD, CBO of BigHat Biosciences.

Credit: Insilico Medicine

Petrina Kamya, PhD, Head of AI Platforms and President of Insilico Medicine Canada, will present at the BIO CEO & Investor Conference happening Feb. 26-27 at the New York Marriott Marquis in New York City. Dr. Kamya will speak as part of the panel “AI within Biopharma: Separating Value from Hype,” on Feb. 27, 1pm ET along with Michael Nally, CEO of Generate: Biomedicines and Liz Schwarzbach, PhD, CBO of BigHat Biosciences.

The session will look at how the latest artificial intelligence (AI) tools – including generative AI and large language models – are currently being used to advance the discovery and design of new drugs, and which technologies are still in development. 

The BIO CEO & Investor Conference brings together over 1,000 attendees and more than 700 companies across industry and institutional investment to discuss the future investment landscape of biotechnology. Sessions focus on topics such as therapeutic advancements, market outlook, and policy priorities.

Insilico Medicine is a leading, clinical stage AI-driven drug discovery company that has raised over $400m in investments since it was founded in 2014. Dr. Kamya leads the development of the Company’s end-to-end generative AI platform, Pharma.AI from Insilico’s AI R&D Center in Montreal. Using modern machine learning techniques in the context of chemistry and biology, the platform has driven the discovery and design of 30+ new therapies, with five in clinical stages – for cancer, fibrosis, inflammatory bowel disease (IBD), and COVID-19. The Company’s lead drug, for the chronic, rare lung condition idiopathic pulmonary fibrosis, is the first AI-designed drug for an AI-discovered target to reach Phase II clinical trials with patients. Nine of the top 20 pharmaceutical companies have used Insilico’s AI platform to advance their programs, and the Company has a number of major strategic licensing deals around its AI-designed therapeutic assets, including with Sanofi, Exelixis and Menarini. 

 

About Insilico Medicine

Insilico Medicine, a global clinical stage biotechnology company powered by generative AI, is connecting biology, chemistry, and clinical trials analysis using next-generation AI systems. The company has developed AI platforms that utilize deep generative models, reinforcement learning, transformers, and other modern machine learning techniques for novel target discovery and the generation of novel molecular structures with desired properties. Insilico Medicine is developing breakthrough solutions to discover and develop innovative drugs for cancer, fibrosis, immunity, central nervous system diseases, infectious diseases, autoimmune diseases, and aging-related diseases. www.insilico.com 


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Another country is getting ready to launch a visa for digital nomads

Early reports are saying Japan will soon have a digital nomad visa for high-earning foreigners.

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Over the last decade, the explosion of remote work that came as a result of improved technology and the pandemic has allowed an increasing number of people to become digital nomads. 

When looked at more broadly as anyone not required to come into a fixed office but instead moves between different locations such as the home and the coffee shop, the latest estimate shows that there were more than 35 million such workers in the world by the end of 2023 while over half of those come from the United States.

Related: There is a new list of cities that are best for digital nomads

While remote work has also allowed many to move to cheaper places and travel around the world while still bringing in income, working outside of one's home country requires either dual citizenship or work authorization — the global shift toward remote work has pushed many countries to launch specific digital nomad visas to boost their economies and bring in new residents.

Japan is a very popular destination for U.S. tourists. 

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This popular vacation destination will soon have a nomad visa

Spain, Portugal, Indonesia, Malaysia, Costa Rica, Brazil, Latvia and Malta are some of the countries currently offering specific visas for foreigners who want to live there while bringing in income from abroad.

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With the exception of a few, Asian countries generally have stricter immigration laws and were much slower to launch these types of visas that some of the countries with weaker economies had as far back as 2015. As first reported by the Japan Times, the country's Immigration Services Agency ended up making the leap toward a visa for those who can earn more than ¥10 million ($68,300 USD) with income from another country.

The Japanese government has not yet worked out the specifics of how long the visa will be valid for or how much it will cost — public comment on the proposal is being accepted throughout next week. 

That said, early reports say the visa will be shorter than the typical digital nomad option that allows foreigners to live in a country for several years. The visa will reportedly be valid for six months or slightly longer but still no more than a year — along with the ability to work, this allows some to stay beyond the 90-day tourist period typically afforded to those from countries with visa-free agreements.

'Not be given a residence card of residence certificate'

While one will be able to reapply for the visa after the time runs out, this can only be done by exiting the country and being away for six months before coming back again — becoming a permanent resident on the pathway to citizenship is an entirely different process with much more strict requirements.

"Those living in Japan with the digital nomad visa will not be given a residence card or a residence certificate, which provide access to certain government benefits," reports the news outlet. "The visa cannot be renewed and must be reapplied for, with this only possible six months after leaving the countr

The visa will reportedly start in March and also allow holders to bring their spouses and families with them. To start using the visa, holders will also need to purchase private health insurance from their home country while taxes on any money one earns will also need to be paid through one's home country.

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