The biotech sector will be one of the greatest beneficiaries of the global cannabis movement and is comprised of some of the most mature and best capitalized companies.
The Nasdaq was the worst performing exchange yesterday and biotech cannabis-focused firms traded lower on average. Although we continue to be bullish on this sub-sector of the cannabis industry, it is also the one that would be most impacted by a correction in the market.
This sector is comprised of some of most attractive long-term companies. We think recent weakness has created opportunity and we want to highlight five cannabis stocks every investor should be watching.
• Insys Therapeutics (INSY) traded in a very volatile range after reporting its fourth quarter and full year financial results yesterday. Insys opened down almost 5% and the shares traded as low as $10.01 before finding support. INSY bounced off these lows and the shares ended the day up 2.2%. INSY is at $10.75 and Technical420 plans to average down and add to its position if the shares trade below $10. The shares are trading well below its average Wall Street price target (more than 60% upside to average price target). One of the main reasons why we are favorable on Insys is because we view the company as an acquisition candidate due to its valuable intellectual property and relatively cheap valuation.
• Corbus Pharmaceuticals (CRBP) gave up all its gains from Monday and the shares are trading at $8.05 after a 2.4% move lower on weak volume. We continue to monitor CRBP from the sidelines after exiting our position within hours of entering. We are on the sidelines due to the misleading reports, the increased volatility, and the potential for the market to dip lower in the near term.
• Cara Therapeutics (CARA) was under pressure yesterday and the shares are trading below the pricing of its recently announced financing. Technical420 remains favorable on Cara Therapeutics and see significant upside to current levels. The shares are trading at $17.92 after a 2.5% move lower and we plan to add to our position on continued weakness. Cara plans to use the proceeds from its $80 million raise to fund clinical and R&D activities, including the completion of the Phase 3 program in uremic pruritus, two Phase 3 trials in acute pain and a Phase 2b trial in osteoarthritis pain. We will keep you updated on how the shares trade today.
• GW Pharmaceutical (GWPH) edged lower on light volume yesterday and the shares are currently trading below its 20 and 50-day moving average. GWPH has fallen 8% in the last month and we view the shares as an attractive long-term opportunity at current levels. GW has one of the deepest pipelines of products in advanced stages of FDA testing. The company also has the best Wall Street coverage and has received buy ratings from Goldman Sachs, Merrill Lynch, and Morgan Stanley. We view GW as an acquisition candidate and Goldman Sachs estimated a $390 a share acquisition price if that was to occur. From the filing of a New Drug Application to multiple Phase 3 Clinical trials, GW Pharma is an event-driven story that has many potential catalysts. We plan to hold and add to our position on continued weakness.
• Zynerba Pharmaceuticals (ZYNE) continues to be one of the most attractive cannabis biotech investment opportunities due to the relatively cheap valuation, its high-quality pipeline of products, the number of upcoming catalysts, and its favorable and improving Wall Street coverage. In late March, H.C. Wainwright raised Zynerba’s price target to $30 from $22. The average price target on shares of Zynerba is north of $30 and offers more than 50% upside to current levels.
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