Here are top biotech stock ideas with upcoming catalysts: Jefferies

Published Thu, Aug 31 20171:26 PM EDTUpdated Thu, Aug 31 20172:26 PM EDT

Jefferies' research team named its favorite picks of biotech stocks that are expected to have good news in the coming months. "Biotech continues its Road to Repair and is near 1-year highs," wrote Jefferies analyst Michael Yee in Thursday's note to clients. Scrutiny over the sector's pricing practices has subsided, general interest in the sector has picked up, and there is recent M & A activity, he said. "Our thesis continues to be the sector has been beaten down for 2 years and [is] pretty cheap vs health care and broader market." Jefferies said that the industry's ever-improving backdrop coupled with a shift in investor focus to fundamentals bodes well for the sector. Here are four companies that made Jefferies' recommended list and the firm's price targets for each. 1) FibroGen ( FGEN ) "Fibrogen will present recently announced positive Phase II data for FG-3019 (pamrevlumab) in IPF at the ERS conference Sep 9-12 in Europe," wrote Yee. "We believe there are mixed expectations here given (1) Phase II is already disclosed as positive and hit the primary endpoint – so details on the efficacy curves and overall waterfall plot or other data is key but expectations are that the drug works … Ultimately – we think FGEN will report data on the positive Phase II which should show the drug has promise." Yee's 12-month price target on FibroGen is $75, which is 61 percent higher than Wednesday's close. 2) Immune Design ( IMDZ ) "Data from their phase II CMB305+Atezo combo trial in soft tissue sarcoma at ESMO (+/- 15%): At ESMO in September, we will likely see additional data from IMDZ's lead combo trial in soft tissue sarcoma (poster presentation Sep 11)," wrote Jefferies' Maury Raycroft. "The European Society for Medical Oncology presentation is expected to include early clinical efficacy, biomarker data, and safety – the first data cut in the abstract (released on Aug 30), then more mature data at the meeting." The analyst's 12-month price target on Immune Design is $18, about 78 percent higher than Wednesday's close. 3) Prothena ( PRTA ) "Prothena is expected to disclose initial Phase IB data for their third drug in the clinic, PRX-003, in psoriasis in October. We believe expectations are mixed on what exactly the drug will show and what is good data vs bad data," continued Jefferies' Yee. "Ultimately, we believe not much is in the stock for this drug and thus upside vs downside is good given low expectations and uncertainty as to the development of the program. We predict the drug will show efficacy including a number of responders in psoriasis based on PASI-75 and PASI-90 scores." Yee's 12-month price target on Prothena is $100, which is 70 percent higher than Wednesday's close. 4) AcelRx Pharmaceuticals ( ACRX ) "The Dsuvia PDUFA date is October 12, 2017. We would expect ACRX and FDA to begin labelling discussions roughly 30 days before the PDUFA date," wrote analyst Matthew Andrews. "Considering FDA's heightened focus on chronic opioids' use in non-medically supervised settings, we believe it would be a positive signal for approval if labelling negotiations begin by mid-September. Recall Dsuvia is an opioid for acute use in a medically supervised setting and does not fall under the chronic opioids product category." Andrews' 12-month price target on AcelRx is $7, which is 109 percent above Wednesday's close.

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Jefferies' research team named its favorite picks of biotech stocks that are expected to have good news in the coming months.

"Biotech continues its Road to Repair and is near 1-year highs," wrote Jefferies analyst Michael Yee in Thursday's note to clients. Scrutiny over the sector's pricing practices has subsided, general interest in the sector has picked up, and there is recent M&A activity, he said.

"Our thesis continues to be the sector has been beaten down for 2 years and [is] pretty cheap vs health care and broader market."

Jefferies said that the industry's ever-improving backdrop coupled with a shift in investor focus to fundamentals bodes well for the sector.

Here are four companies that made Jefferies' recommended list and the firm's price targets for each.