You’ve no doubt heard a lot about the “Magnificent Seven” stocks. Each stock in this group — Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta Platforms, and Tesla — delivered gains of 48% or more in 2023. Nvidia more than tripled, while Meta came close to doing so.
However, those performances pale in comparison to what one stock has done barely over two weeks into the new year. Forget the Magnificent Seven: Longboard Pharmaceuticals (NASDAQ: LBPH) has nearly quadrupled in 2024 — and Wall Street thinks it can go a lot higher.
Behind Longboard Pharmaceuticals’ massive gain
It’s completely understandable if you’ve never heard of Longboard Pharmaceuticals. At the end of 2023, its market cap was only around $144 million. That’s too small to be on the radar screens for most investors.
However, Longboard began the new year with a bang. On Jan. 2, the company announced positive results from its Pacific phase 1b/2a clinical study evaluating the experimental drug bexicaserin in treating developmental and epileptic encephalopathies (DEEs).
Using the word “positive” doesn’t convey just how good Longboard’s update was. The company’s chief medical officer, Randall Kaye, described the Pacific study results for bexicaserin as “exciting.” Tracy Dixon-Salazar, executive director of the LGS Foundation, an organization that supports research and education related to Lennox-Gastaut Syndrome (LGS), used the adjective “remarkable.”
In Longboard’s clinical study, patients who received bexicaserin experienced a 53.3% median decrease in countable motor seizure frequency compared to a 20.8% decrease for those receiving placebo. Patients with Dravet syndrome, a genetic form of epilepsy, experienced a 72.1% median decline in countable motor seizure frequency. Patients with LGS experienced a median seizure reduction of 48.1%, while patients with other types of DEE experienced a reduction of 61.2%.
What’s more, bexicaserin’s safety profile looked encouraging. Nearly 86% of patients who received Longboard’s experimental drug tolerated the highest dose of 12 milligrams. Nine patients in the bexicaserin group dropped out of the study due to adverse events, but two of those did so during the maintenance period. All participants who completed the study chose to enroll in Longboard’s ongoing 52-week open-label extension study.
Next steps for Longboard
CEO Kevin R. Lind said in the press release announcing the results earlier this year that the company is ramping up to advance bexicaserin into late-stage testing. It is making preparations at the same time as it further evaluates the full data from the Pacific study.
Lind said that he and the rest of Longboard’s team “believe that bexicaserin provides us with the cornerstone to build a world-class epilepsy franchise and to explore development paths forward that may offer novel options to DEE patients that are vastly underserved.” Kaye proclaimed that bexicaserin “has the potential to redefine the standard of care in DEEs.”
This optimism could be warranted. Only four DEEs currently have approved therapies, leaving more than 20 types of DEE with no approved therapy. Importantly, the number of patients with these other DEEs could be greater than the combined number of patients with the four types of DEE with approved therapies. Bexicaserin also appears to be competitive in seizure reduction with the leading approved therapies for Dravet syndrome and LGS.
Longboard should be in a good position financially to fund its late-stage study. The company quickly moved to issue new shares after its stock surged. It raised gross proceeds of around $241.5 million from this public offering.
Wall Street remains bullish
Even after the stock’s tremendous gain this year, Wall Street remains bullish. All seven of the analysts recently surveyed by LSEG rated the stock as a buy or a strong buy.
What’s even more impressive is just how high analysts think Longboard’s share price can go. The average 12-month price target reflects an upside potential of nearly 77%. The most pessimistic price target for the stock is 28% above the current share price.
Is Longboard a better pick than the Magnificent Seven?
Longboard Pharmaceuticals has clearly outperformed all of the Magnificent Seven stocks early in 2024. It also has broader enthusiastic support on Wall Street than those much larger stocks have as well.
However, this doesn’t necessarily make it a better pick than all of the Magnificent Seven. Clinical-stage biotech stocks are inherently risky. It’s possible that the late-stage clinical study for bexicaserin won’t be as successful as the Pacific study.
More importantly, Longboard might not be able to deliver the long-term returns that stocks such as Amazon, Alphabet, Nvidia, and the others will. Those giants are already highly profitable and have multiple growth drivers. All of Longboard’s fortunes, for now, hinge on bexicaserin and one other pipeline candidate, LP659.
But investors seeking a truly explosive stock that could still have plenty of room to run over the short term could find Longboard Pharmaceuticals quite attractive. You might even say that it’s a magnificent stock to consider.
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Forget the “Magnificent Seven” — This Stock Has Nearly Quadrupled in 2024, and Wall Street Thinks It Can Go a Lot Higher was originally published by The Motley Fool