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2 Wells Fargo Biotech Shares Says Ready to Bounce Back
The biotechnology sector has started the year on a high note. The industry benchmark, iShares NASDAQ Biotechnology ETF (IBB), is up about 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 is optimistic about what he’s seeing. “Overall, we are seeing about 20% to 30% more upside for the industry based on historical parameters and we would say that the faster pace of innovation and greater reduction in pipeline risk should ultimately support higher returns on investment, ”noted Birchenough. An environment like this will be a godsend for any investor interested in pharmaceutical stocks; an improved political climate will only add a little icing to this pie. “While a separate 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 the value proposition for emerging biotechnology therapies should prevail in any combination of administration and House / Senate. Birchenough added. With that in mind, we wanted to check out some of Wells Fargo’s recent choices in biotech to see if the investment firm could point us to some game-changing. After going through the tickers in TipRanks’ database, we discovered that two recently bought notes were rated by the rest of the street, enough to get a “Strong Buy” consensus rating. Karuna Therapeutics (KRTX) We will start with Karuna Therapeutics, a specialty pharmaceutical company that focuses on mental health. Specifically, Karuna is working on the development of new drugs for the treatment of schizophrenia and dementia-related psychoses (DRP). With a potential patient base exceeding 2.7 million people, this is a large market. And the state of current treatment options is widely viewed 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 that can bring a new, more effective treatment to market. Karuna is currently recruiting the pivotal phase 3 EMERGENT-2 study of its lead drug candidate, KarXT, for the treatment of acute psychosis in adults with schizophrenia. KarXT showed a differentiated safety profile and efficacy in phase 2 data. In addition, phase 1b data in healthy elderly volunteers for DRP remains on track for 2T21. This strong pipeline, with a new drug in multiple studies to treat several aspects of a serious disorder, has piqued the interest of Wells Fargo. Covering KRTX for the company, analyst Jacob Hughes writes: “Karuna Therapeutics is our main idea in 2021. While KRTX stocks have had an impressive run … we are seeing a very attractive setup for the stock over the two years. coming years and several important catalysts in 2021 to drive equities higher… We believe the pipeline has been lightened and we like the risk / reward at these levels because KarXT’s value is proven. To that end, Hughes places the stock overweight (i.e. buy) and his price target of $ 163 implies a ~ 59% rise for the coming year. (To see Hughes’ track record, click here) It’s not often that analysts all agree on a stock, so when it does, take note. KRTX’s Strong Buy consensus rating is based on a consensus of 6 buyings. The average stock price target of $ 138.80 suggests a 35% rise from the current price of $ 102.80. (See KRTX stock review on TipRanks) Zymeworks, Inc. (ZYME) Vancouver-based Zymeworks is a clinical-stage biotechnology company involved in the research of new drugs for the treatment of cancer, autoimmune diseases and inflammatory diseases. The company focuses on biotherapies, drugs that are precisely designed for their target diseases. The company’s lead candidate, zanidatamab, has indications for bile duct cancer, breast cancer and gastroesophageal adenocarcinoma. The drug is in test phase 1/2 for these cancers. Zymeworks’ second clinical candidate, ZW49, like zanidatamab, is a bispecific HER2 antibody in an early stage study as a treatment for solid tumors. Initial data will be presented at an investor event on January 27. Based on the results of the recent Zymeworks study, Jim Birchenough of Wells Fargo writes: “[We] expect zanidatamab to differentiate from current HER2 standards due to depth of response in refractory and first-line patients and attract a leading partner to continue studies in neoadjuvant and adjuvant breast cancer , and for the future dose of ZW49 to demonstrate consistent responses to support further development, with upside potential for further dose escalation. Consistent with his bullish stance, Birchenough rates ZYME as overweighting (ie buying) and his price target, at $ 71, implies ~ 47% growth ahead. (To see Birchenough’s record, click here) Turning to the rest of the street now, it seems other analysts are generally on the same page. With 4 purchases and 1 wait assigned in the last three months, the consensus rating is a strong buy. In addition, the average price target of $ 60.82 implies an increase of approximately 26% from current levels. (See ZYME Stock Analysis on TipRanks) To find great ideas for biotech stocks that trade at attractive valuations, visit TipRanks Best Stocks To Buy, a recently launched tool that brings together all the information about shares of TipRanks. Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
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