Top Picks 2021: Celldex Therapeutics (CLDX)

01/14/2021 5:00 am EST

Focus: HEALTHCARE

Jay Silverman

Analyst, Medical Technology Stock Letter

Celldex Therapeutics (CLDX) has developed CDX-0159, an anti-C-KIT antibody that has blockbuster potential in various mast cell diseases, explains biotech expert Jay Silverman, contributing editor to The Medical Technology Stock Letter.

CDX-0159 is a humanized monoclonal antibody that specifically binds the receptor tyrosine kinase KIT (also called stem cell factor or SCF) with high specificity and potently inhibits its activity.

KIT is expressed in a variety of cells, including mast cells, which mediate inflammatory responses such as hypersensitivity and allergic reactions. KIT signaling controls the differentiation, tissue recruitment, survival and activity of mast cells. 

In certain inflammatory and allergic diseases, such as chronic urticaria, mast cell activation plays a central role in the onset and progression of the disease. KIT inhibition is involved in the potential treatment of various multi-billion acute and chronic conditions.

With a market cap of ~$700 million and ~$200 million in cash, in our view, CLDX is extremely undervalued based on the potential of CDX-0159 alone. When compared with the a $7+ billion market cap for Allakos (ALLK) —another mast cell targeted company — it appears even more undervalued to us.

After releasing highly positive initial clinical data resulting in significant mast cell depletion and a clean safety, two Phase 1 trials in urticaria (rash/hives) were initiated in the fall. These clinical trials are relatively quick to perform as trials go and data are released. Data from the first study is due by March 2021.

We recommend shares of CLDX. Several new top-tier biotech investors seem to agree as they have begun to accumulate positions. Lastly, as a wholly owned asset, we also think that CLDX is an attractive takeover candidate. CLDX is a "buy" under $20 with a target price of $30.

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Meanwhile, Myovant (MYOV) was my Top Pick last year and the stock gained 78%. The firm’s GNRH-antagonist relogilix delivered positive results in every clinical trial in 2020. Subsequently, the drug received its first FDA approval in December for treating advanced prostate cancer.

At the very end of the year, MYOV formed a major partnership with global powerhouse Pfizer (PFE) to jointly develop and commercialize ORGOVYX (the brand name of relugolix) and relugolix in advanced prostate cancer woman’s health.

Additional approvals are expected in 2021 for treating uterine fibroids and endometriosis. The combination of a split of the economics, a large cash infusion (no equity/dilution), PFE’s global infrastructure and the competitive advantages of relugolix on its own, the forecasts for Myovant are much greater now.

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