Cantor picks 14 undervalued biotech stocks worth a second look

Cantor Fitzgerald has selected its 14 top picks for biotech stocks that it regards as significantly undervalued and worth a “fresh” look.

All of the picks were down more than 20% year-to-date, according to Cantor’s note dated May 6, with most having established proof-of-concept for their products.

In comparison, the SPDR S&P Biotech ETF (XBI) has slipped 1% while the S&P500 has risen nearly 10% since the beginning of the year. Over the past 12 months, the SPDR S&P Biotech ETF has edged up 1% while the S&P500 has climbed 26%, as of market close on May 10.

Making Cantor’s list was ACADIA Pharmaceuticals (NASDAQ:ACAD), Arrowhead Pharmaceuticals (ARWR), Arvinas (ARVN), BridgeBio Pharma (NASDAQ:BBIO), Cabaletta Bio (CABA), Denali Therapeutics (NASDAQ:DNLI), 89bio (ETNB), Immunovant (IMVT), Disc Medicine (IRON), MoonLake Immunotherapeutics (MLTX), Marinus Pharmaceuticals (MRNS), Intellia Therapeutics (NTLA), Prothena (PRTA), and Rocket Pharmaceuticals (NASDAQ:RCKT).

Starting with ACADIA, Cantor said it remains “cautiously optimistic” about the company’s late-stage drug candidates for the treatment of Prader-Willi syndrome and Alzheimer’s psychosis. The bank labels ACADIA a “good value play,” given its profitable Nuplazid franchise. Cantor has a price target of $37 on the stock.

Cantor praised Arrowhead for its “strong” RNAi platform. The bank noted Arrowhead shares were down on no fundamental news and despite reduced spending and the removal of a financing overhang. Cantor said it views Arrowhead as “undervalued based on just two late-stage assets, with all other pipeline assets providing meaningful upside optionality.”

The investment bank said the recent pullback in Arvinas shares “seems to be driven by management changes and some speculation over topline delay, though we don’t see these as red flags.” Cantor added it sees the current price as a good entry point, with upcoming Phase 3 data for vepdegestrant in the 2L+ setting having a “good chance of being positive.”

Cantor said it was “surprising” that BridgeBio was on its devalued list, considering the company addressed its financing overhang with minimal dilution, amongst other developments.

The bank said it believes BridgeBio’s drug acoramidis has a “clear path” to over $1B a year in peak sales as it offers “superior” TTR stabilization to Pfizer’s (PFE) tafamidis and is “unlikely to be beaten by Alnylam’s (ALNY) vutrisiran.” Cantor also said it’s not worried about the timing of generic competition for tafamidis, given acoramidis’s “stronger profile.” Cantor has a price target of $70 for the stock.

Cabaletta’s stock, meanwhile, has been under pressure in part over concerns that its manufacturing partner, Chinese drugmaker WuXi, “is in the government crosshairs,” even though the company has alternate vendors lined up.

Cantor noted that Cabaletta continues to advance its CD19 CAR-T therapy for autoimmune indications, adding “investors have been jittery regarding a few issues which we ultimately believe will prove to be overblown.” The bank has a price target of $50 for the stock.

Meanwhile, Cantor believes Denali has “one of the most valuable biotech platforms around,” particularly its blood-brain barrier drug delivery technology. The bank added that it’s “incredibly frustrated” that the FDA regulators at CBER “seem to be rolling out the red carpet” for REGENXBIO’s (RGNX) Hunter Syndrome drug while CDER regulators are making Denali “go through the clinical hoops” with its drug DNL-310, despite its “vastly superior dataset.”

Cantor said it was “hopeful that within the year” CDER decides DNL-310 “is suitable for accelerated approval and puts it on the path” to being a potential $1B product. The bank has a price target of $35 on the stock.

89bio shares have also been sold off for “no fundamental reasons,” aside from “outside noise in the MASH space,” Cantor said. “We see this as a good name to own for long-term holders,” Cantor added, as the company has “essentially three shots on goal with SHTG, F2/F3 MASH and F4 MASH.” The bank has a price target of $29 on the stock.

Cantor views Immunovant’s peak sales potential for its “first-in-class and/or best-in-class” anti-FcRns as “underappreciated.” Cantor added that it sees upwards earnings revisions helping to close the gap between Immunovant and its larger market cap rivals/recent takeouts.

Disc Medicine (IRON), Cantor said, is also “worth a look” at current valuation. Cantor still sees a path forward for its drug bitopertin, “given the robustness effect now observed in two trials.” The bank has a price target of $85 on the stock.

Cantor said it believes MoonLake Immunotherapeutics (MLTX) has fallen so much this year because of a “weak” near-term catalyst path and an M&A premium that is “now mostly out.” The bank believes MoonLake is undervalued by more than 60% just based on its market opportunity in hidradenitis suppurativa, “with other de-risked IL-17 indications providing more upside.”

Marinus, which experienced a “fundamental speedbump” with its Phase 3 RAISE study, could now be “more attractively priced compared to others as an acquisition candidate,” Cantor said.

The bank views the upcoming readout from Marinus’s Trust TSC study for tuberous sclerosis complex, which is expected mid-November, as “high conviction,” with positive data leading to a possible approval in 2025. Cantor has a price target of $13 on the stock.

Meanwhile, Cantor said it could justify a higher valuation for Intellia Therapeutics (NTLA) based on the market potential for its hereditary angioedema program. Cantor added that they would be buyers into an upcoming readout for rival Alnylam’s HELIOS-B study, which is expected in late June/early July. Cantor’s price target for the stock is $65.

Cantor said Prothena’s “extensive” portfolio is often overlooked by investors, who have largely been focusing on its Alzheimer’s drug candidate PRX012. The bank also noted that Prothena’s drug birtamimab is expected to a have a topline readout from a Phase 3 study in AL amyloidosis in the Q4 2024 to Q2 2025 timeframe.

As for Rocket, Cantor said it’s still a top SMID pick for the bank “as the company has four development stage gene therapy programs that have established clear clinical proof of concept, a keen eye for opportunity and a PKP2 gene therapy program emerging as well.

Cantor noted the PDUFA date for Rocket’s gene therapy Kresladi is June 30, which could generate a priority review voucher, if approved. Cantor has a price target of $65 on the stock.