Goldman Sachs says this biotech working on a Botox rival drug could rally nearly 30%

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Revance Therapeutics, a biotechnology company working on a Botox competitor set to soon launch in the U.S., is a solid bet, according to Goldman Sachs.

The bank on Thursday initiated coverage of the company with a buy rating and $33 price target, which implies a more than 28% jump is possible for the stock in the next 12 months. Year to date, Revance has surged more than 58%.

"We believe the imminent launch of Daxxify into the $1.7bn US cosmetic neuromodulator market has the potential to be disruptive, garnering share and potentially also helping to grow what remains a still relatively underpenetrated market," wrote analyst Chris Shibutani in a Thursday note.

Made to last

Goldman said Revance's drug is set up for success as it lasts longer than competitors currently on the market — it's expected to produce benefits for a median of six months, compared with the three to four months offered by existing products.

"We see potential for an even greater level of receptivity to Daxxify's extended duration of efficacy within therapeutic market indications given the potential to effectively reduce the frequency of treatments versus currently approval botulinum toxin injections, by ~50% annually, with the consequent advantages to patients from a quality-of-life standpoint," said Shibutani.

Even if the U.S. falls into recession in the coming months, the company is poised to outperform, according to Goldman.

"Our review of historical analogs of aesthetic products during economic downturns and average costs across common medical aesthetic procedures suggests that neuromodulator products in particular are more resilient in the face of less favorable/challenging macroeconomic environments, than other elective cosmetic products (including injectable dermal fillers), procedures and treatments," Shibutani wrote.

While pricing for Revance's Botox competitor has not yet been disclosed, Goldman estimates it will have a roughly 30% premium to competitors. This price considers the value proposition of lasting longer for both doctors and patients.

U.S. and global growth

Given these things, Goldman sees Daxxify garnering 21% of the U.S. cosmetic neuromodulator market by 2025 and 35% by 2030. The company is also well-positioned for growth in the $2.7 billion global industry.

The company also has a forecast $470 million in cash equivalents on hand, according to Goldman Sachs. This cash cushion should provide it with "sufficient runway to support key efforts for the company through to profitability in the 2025 time-frame."