3 Biotech Catalysts Present Major Opportunity

Key Points

• Biotech companies tend to be high-risk, high-reward, with success often hinging upon a key drug development or approval.
• Three biotech names that have seen positive news or which have promising drugs in development include Boston Scientific, Arcutis Biotherapeutics, and Tarsus Pharmaceuticals.
• Each of these companies has positive returns so far this year, with additional upside expected.

For biotech firms, a bit of positive news—a key result from clinical trials or new drug discovery, say—can be the difference between a major rally based on a path toward sustained profitability and a slump that can lead to the firm's eventual demise. 

This high-risk industry is home to some of the most influential medicine makers in the world, but it is also littered with relative unknowns that may or may not ever see a significant breakthrough.

Three biotech companies may stand out to investors for notable share price catalysts, either recently achieved or likely on the horizon. According to analysts, each of these companies already has positive returns year-to-date (YTD)—though to different degrees—and ample room for additional upside.

Medical Device Name Rebounds Amid FDA News as Analysts Stay Bullish

Boston Scientific Corp. NYSE: BSX makes medical devices for diagnosing and treating gastrointestinal and pulmonary conditions, among others. The company's massively popular heart devices were recently the subject of safety alerts from the FDA, prompting a slight dip in share price, although BSX stock has since reclaimed most of that decline.

This may be because the company has suggested that the danger for its Watchman device, used to reduce the risk of stroke, isn't associated with the design or manufacture of the system itself, but rather with other factors like the level of anesthesia used during implantation.

As the company navigates this challenge, it also has positive news to buoy it. Namely, the FDA recently approved the expanded use of its FARAPULSE pulsed field ablation system to treat certain atrial fibrillation, a condition impacting nearly 60 million people.

In terms of financials, Boston Scientific is strong—its organic sales rose by 17% year-over-year (YOY) for the latest quarter, with 28% for Watchman specifically, and the company beat analyst predictions for both top and bottom lines. With 24 out of 26 analysts viewing BSX as a Buy, and upside potential of more than 10%, investors may find this stock compelling, despite being expensive.

Dominant Dermatological Product Sees New Approvals, Alongside Pipeline Development

Arcutis Biotherapeutics Inc. NASDAQ: ARQT is a biopharma firm focused on potential drug treatments for dermatological diseases. One of its primary products is ZORYVE, a topical treatment for plaque psoriasis and types of eczema. The success of this treatment helped to drive 164% YOY growth to product sales for the latest quarter and should aid the company in achieving free cash flow breakeven by next year.

Though Arcutis faces intense competition, ZORYVE's dominance—it represents close to half of all non-steroidal topical psoriasis prescriptions—alongside important new pipeline developments, provides stability. The FDA recently approved the company's ZORYVE foam for scalp and body plaque psoriasis, providing access to a new group of customers, and the company expects additional decisions from regulators later in the year.

Arcutis also has a strong lineup of drugs in development, including a candidate for treating atopic dermatitis, and new studies on candidates for treating vitiligo and hidradenitis suppurativa.

Arcutis does not have as much analyst attention as Boston Scientific, but six out of seven analysts rate ARQT a Buy Notably, the company may have 24% in upside potential, despite already climbing by nearly 10% YTD.

Major Demodex Treatment Success and a Promising Pipeline

Another biopharma company, Tarsus Pharmaceuticals Inc. NASDAQ: TARS focuses on eye care. Though the firm posted wider-than-anticipated losses per share of 48 cents in its second quarter, it also reported a strong net sales beat of almost $103 million, thanks to sales of XDEMVY, a treatment for Demodex blepharitis, and its successful direct-to-consumer campaign.

Investors may be interested in following the company's pending Phase II study of its TP-04, a candidate for treating ocular rosacea, which appears promising. This and other drugs in Tarsus' pipeline have led six out of seven analysts to rate the company a Buy.

Shares of TARS are up about 4% YTD, but with more than 16% in upside potential, the firm may have plenty of room for a continued rally.