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2 stocks of biotechnology that Wells Fargo says are ready to jump
The biotechnology sector started the year with strength. The industry benchmark, iShares NASDAQ Biotechnology ETF (IBB), has gone up ~ 11% so far in January – much better than the 3% return on the S&P 500. Covering the sector for Wells Fargo, 5-star analyst Jim Birchenough is optimistic about what you see. “Overall, we see about 20% to 30% additional appreciation for the sector by historical metrics and we would argue that accelerating the pace of innovation and further reducing pipeline risk should ultimately support higher returns on investment ”Noted Birchenough. Such an environment will be a manna from heaven for any investor interested in pharmaceutical stocks; a better political climate will just add a little icing to this cake. “Although a division in the House and Senate supporting continued legislative inertia would have been better received, in terms of maintaining a positive status quo for the growth of biotechnology, we believe that the value proposition for emerging biotechnological therapy must win under any administration and House / Senate combination, ”added Birchenough. With that in mind, we wanted to check out some of Wells Fargo’s recent choices in the biotechnology space to see if the investment firm could lead us to some game change. After running the tickers in the TipRanks database, we found that two recently scored Buy ratings from the rest of the Street, enough to earn a consensus rating of “Strong Buy”. Karuna Therapeutics (KRTX) We will start with Karuna Therapeutics, a specialized pharmaceutical company that focuses on mental health. Specifically, Karuna works on the development of new drugs for the treatment of schizophrenia and psychoses related to dementia (DRP). With a potential patient base of more than 2.7 million people, this is a huge market. And the status of current treatment options is widely considered less than satisfactory. The side effects of medications are severe, while the therapeutic effects are less than desired. This makes room for a company that can put a new and more effective treatment on the market. Karuna is currently enrolling in the EMERGENT-2 Phase 3 main study of her main 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 PRM remains on track for 2Q21. This solid line, with a new drug in several studies to treat various aspects of a serious disorder, sparked Wells Fargo’s interest. Covering KRTX for the company, analyst Jacob Hughes writes: “Karuna Therapeutics is our main idea in 2021. Although KRTX’s shares have had an impressive run … we see a very attractive configuration for the shares in the coming years and several catalysts important in 2021 to drive higher actions … We believe that the pipeline was risk-free and we like the risk / reward at these levels, as the value of KarXT is proven. To this end, Hughes classifies the stock as Overweight (ie Buy), and its target price of $ 163 implies an increase of ~ 59% for the next year. (To see Hughes’ history, click here) It is not always that all analysts agree on a stock, so when it does, write it down. KRTX’s strong purchase consensus rating is based on a unanimous 6 purchases. The average price target of $ 138.80 per share suggests an increase of 35% compared to the current share price of $ 102.80. (See KRTX stock analysis at TipRanks) Zymeworks, Inc. (ZYME) Zymeworks, based in Vancouver, is a clinical stage biotechnology involved in the research of new drugs for the treatment of cancer, autoimmune disorders and inflammatory diseases. The company focuses on biotherapeutics, drugs that are precisely prepared for their target diseases. The company’s main candidate, zanidatamab, has indications for biliary tract cancer, breast cancer and gastroesophageal adenocarcinoma. The drug is in the 1/2 stage of testing for these types of cancer. Zymeworks’ second clinical candidate, ZW49, like zanidatamab, is a bispecific HER2 antibody in the early stages of study as a solid tumor treatment. The initial data will be presented at an event for investors on January 27. Based on the results of the recent Zymeworks study, Jim Birchenough of Wells Fargo writes: “[We] expects zanidatamab to differ from current HER2 standards due to the depth of response in refractory and frontline patients and to attract a prominent partner to seek neoadjuvant and adjuvant breast cancer studies and for the progressive dose of ZW49 to demonstrate consistent responses to support development, with the potential to increase additional dose increases. ”In line with his optimistic stance, Birchenough classifies ZYME as Overweight (ie, Buy) and its target price, at $ 71, implies a ~ 47% increase ahead. (To see Birchenough’s history, click here) Moving now to the rest of the Street, it appears that other analysts are usually on the same page. With 4 purchases and 1 waiting assigned in the last three months, the consensus rating comes as a strong purchase. In addition, the average price target of $ 60.82 implies a ~ 26% increase from current levels. (See ZYME’s stock analysis on TipRanks) To find good ideas for trading biotechnology stocks with compelling valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that brings together all of TipRanks stock perceptions. Legal Notice: The opinions expressed in this article are exclusively those of the analysts presented. The content should be used for informational purposes only. It is very important to do your own analysis before making any investment.