3 Biotech Stocks For The Second Half Of 2024

The small biotech sector has underperformed the major indices in a major way so far in 2024. While the NASDAQ (COMP.IND) and S&P 500 (SP500) are both up in the mid-teens so far this year, the SPDR® S&P Biotech ETF (XBI) up just over three percent in 2024. It should be noted that AI juggernaut Nvidia Corporation (NVDA) has accounted for approximately a third of the gains in the major indices year to date.

The small biotech arena should perform better as the Federal Reserve cuts interest rates in the quarters ahead, as that historically helps the high beta sectors of the market. A pickup in M&A volume across the industry could also provide a major boost to this sector should that occur. Today, we tee up three small-cap biotech names that look poised to deliver for shareholders in the second half of 2024. I have highlighted all of these companies in articles posted this year. However, all of them have seen positive trial data come out after those pieces were published.

Let’s start with Altimmune (ALT). I profiled this potential entrant in the massive and growing GLP-1 weight loss space in late May. Wednesday, I added significantly to my holdings in ALT via covered call orders as the stock sank some 15% in trading that day. The trigger for the decline was the untimely and unexpected death of the company’s CEO. I am willing to go out on a limb and state this likely will have no long-term impacts to the company’s developmental efforts.

Actually, there has been recent good news on the trial developmental front. On Monday of this week, Altimmune posted some Phase 2 study data around its primary obesity candidate pemvidutide saw an average 15.6% weight loss at 48 weeks of its study from the highest of three doses being evaluated. Importantly, less of the weight loss came from lean muscle mass than either from GLP-1 blockbuster drugs Wegovy from Novo Nordisk (NVO) or Eli Lilly’s (LLY) Zepbound.

A few days before this data posted, B. Riley Financial reissued its Buy rating and $20 price target on ALT. Riley’s analyst noted

‘The recent presentations at ADA’24 highlighted compelling Phase IIb data for Altimmune’s lead candidate, pemvidutide, which suggests a strong therapeutic potential in the obesity drugs landscape. Notably, the drug demonstrated lean mass preservation during weight loss, which is a significant differentiator compared to competitors, as well as notable reductions in LDL-C and triglycerides, showcasing its lipid-lowering efficacy. Furthermore, the proportion of non-responders was low, indicating the drug’s significant potency in inducing weight loss.’

He also was impressed by pemvidutide’s “favorable impact on blood pressure and a balanced HbA1c profile” as well as the compound’s ability to potentially differentiate itself in the GLP -1 market. With Altimmune’s under $500 million market capitalization, the stock makes an attractive buyout target given the huge interest in the burgeoning GLP -1 space.

Next, we have Intellia Therapeutics (NTLA), a promising clinical stage gene therapy concern. I last posted an article around Intellia Therapeutics in late February here on Seeking Alpha. Earlier this month, the company posted impressive Phase 1 results around its candidate for hereditary angioedema, or HAE. Data showed that a single dose of NTLA-2002 led to a 98% mean reduction in the monthly attack rate. Eight of the ten patients in the trial were attack-free following a 16-week primary observation period through the last follow-up of the study. Of note, these included patients who had the most extreme version of this rare affliction.

In addition, some Phase 2 results evaluating NTLA-2002 should be out this summer. If all goes well, a Phase 3 pivotal trial should kick off by the end of this year. FDA approval could follow some time in 2027. It is important to note that HAE is a significant and growing market.

Several approved drugs are on the market that treat the condition, including market leading Takhzyro from Takeda (TAK) which did some $1.14 billion in revenues in FY2022. Several other companies are pursuing potentially more effective treatments in clinical development. However, if NTLA-2002 succeeds, it will not be a “treatment” but offer a potential one-time curative dosage for the disease and therefore should dominate the space. Since that study data hit just over three weeks ago, 10 analyst firms, including Wells Fargo, BMO Capital and Stifel Nicolaus have reissued/assigned Buy ratings on the stock. Price targets proffered range from $24 to $95 a share, with most price targets being between $57 to $73 a share. NTLA currently trades in the low $20s.

Finally, we have Mirum Pharmaceuticals (MIRM) which I last highlighted here on these pages in early March. The company is advancing on two key fronts. First, its drug Livmarli, an oral solution approved for the treatment of cholestatic pruritus for Alagille syndrome patients, is demonstrating more than solid sales traction. This rare affliction affects some 30,000 to 40,000 individuals in the States. This compound was approved in the U.S. in 2021 and in Europe soon after in 2022.

Livmarli had net product sales of $68.9 million in the first quarter, which Mirum reported in early May. This was a 137% increase from the same period a year ago, and management has guided Livmarli should do between $310 million to $320 million in net sales in FY2024. Two weeks ago, Mirum reported solid Phase 2b results around is primary pipeline asset volixibat. This compound is an oral ileal bile acid transporter inhibitor that Mirum is evaluating to treat primary sclerosing cholangitis, and primary biliary cholangitis. Data showed 75% of patients on volixibat achieved a greater than 50% reduction in serum bile acids. The compound had good safety and tolerability marks as well.

This study news pushed the stock up by some 20% last week. This new data also triggered four analyst firms, including J.P. Morgan and Morgan Stanley, to reissued Buy ratings on this stock. Of note, three of these Buy reiterations had significant upward price target revisions contained within them. New price targets proffered range from $39 to $66 a share. MIRM currently trades in the low $30s, even after last week’s equity surge.

Mirum Pharmaceuticals currently has a market capitalization of just over $1.5 billion and should have no need to raise additional capital as the company should achieve breakeven status or become profitable for the first time in FY2025. In late May, Wells Fargo place the company on its potential biotech/biopharma buyout list as well.

And those are three small-cap biotech names with encouraging recent trial news and that look poised to have a solid second half of 2024, especially if sentiment on the small biotech sector improves in the coming months.