2 Biotech stocks Wells Fargo says they are ready to rebound
The biotech industry got off to a great start to the year. The industry benchmark, iShares NASDAQ Biotechnology ETF (IBB), has risen 11% so far in January, much better than the 3% return of the S&P 500. Covering the sector for Wells Fargo, 5-star analyst Jim Birchenough he is optimistic about what he sees. “Overall, we see around 20-30% additional upside for the sector based on historical metrics and would argue that accelerating the pace of innovation and greater reduction in pipeline risk should ultimately support higher returns on investments.” Birchenough noted. Such an environment will be a godsend for any investor interested in pharmaceutical stocks; an improved political climate will only add a few icing to this cake. “While a divided House and Senate in support of continued legislative inertia would have been best received in terms of maintaining a positive status quo for biotech growth, we believe the value proposition for emerging biotech therapies should have the best under any administration and House / Senate combination, ”Birchenough added. With that in mind, we wanted to take a look at some of Wells Fargo’s recent biotech picks to see if the investment firm could guide us towards some turning point. After running tickers through the TipRanks database, we found that two recently got buy ratings from the rest of the way, enough to get a “Strong Buy” consensus rating. Karuna Therapeutics (KRTX) We will start with Karuna Therapeutics, a specialized pharmaceutical company whose focus is mental health. Specifically, Karuna works on the development of new drugs for the treatment of schizophrenia and dementia-related psychosis (DRP). With a potential patient base of over 2.7 million, this is a broad market. And the state of current treatment options is widely regarded as less than satisfactory. The side effects of the drugs are severe, while the therapeutic effects are less than desired. This leaves an opening for a company to bring a new, more effective treatment to market. Karuna is currently enrolling the pivotal phase 3 EMERGING-2 trial of its lead drug candidate, KarXT, for the treatment of acute psychosis in adults with schizophrenia. KarXT showed a differentiated safety and efficacy profile in Phase 2 data. In addition, Phase 1b data in healthy elderly volunteers for DRP remains on track for 2Q21. This solid pipeline, with a new drug in multiple studies to treat different aspects of a serious disorder, sparked Wells Fargo’s interest. Looking back at KRTX for the company, analyst Jacob Hughes writes, “Karuna Therapeutics is our main idea in 2021. Although KRTX shares have had an impressive run … we see a very interesting setup for the stock over the next couple of years. and several major catalysts in 2021 to increase equities … We believe the pipeline has been reduced risk and we like the risk / reward at these levels as the value of KarXT is proven. ” To that end, Hughes views the stock as overweight (aka buying) and its $ 163 price target implies a ~ 59% upside for next year. (To see Hughes’ track record, click here) It’s not often that analysts all agree on a stock, so when it happens, take note. The KRTX Strong Buy Consensus Rating is based on 6 unanimous purchases. The stock’s $ 138.80 average price target suggests a 35% rise from its current share price of $ 102.80. (See KRTX stock analysis on TipRanks) Zymeworks, Inc. (ZYME) Vancouver-based Zymeworks is a clinical-stage biotechnology involved in researching new drugs to treat cancer, autoimmune diseases, and inflammatory diseases. The company focuses on biotherapeutics, drugs specially designed for their target diseases. The company’s lead candidate, zanidatamab, has indications for biliary tract cancer, breast cancer, and gastroesophageal adenocarcinoma. The drug is being tested 1/2 for these cancers. Zymeworks’ second clinical candidate, ZW49, like zanidatamab, is a bispecific HER2 antibody in an early stage study as a solid tumor treatment. Initial data will be presented at an investor event on January 27th. Based on recent results from a Zymeworks study, Wells Fargo’s Jim Birchenough writes: “[We] expect zanidatamab to differ from current HER2 standards by virtue of depth of response in refractory and frontline patients and attract a prominent partner to pursue neoadjuvant and adjuvant breast cancer studies and that the advanced dose of ZW49 demonstrates consistent responses to support further developments, with a potential upside from increasing the additional dose. “In keeping with its bullish stance, Birchenough rates ZYME as overweight (i.e. Buy) and its price target, at $ 71, implies a ~ 47% growth. (To see Birchenough’s track record, click here) now at the rest of the way, it appears that other analysts are generally on the same page. With 4 buy and 1 hold allotted over the past three months, the consensus rating looks like a strong buy. Also, the average price target of $ 60 , 82 implies a roughly 26% upside from current levels. (See ZYME Stock Analysis on TipRanks) To find good ideas for trading biotech stocks at attractive valuations, visit TipRanks’ Best Stocks to Buys, a new tool. launched that combines all of TipRanks’ equity insights. Disclaimer: The views expressed in this article are solely those of the analysts present. Content should be used for informed purposes only. vo. It is very important to do your own analysis before making any investments.
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