The big question on the minds of investors right now is: where will inflation go? And the related follow-up question, for everyone, is: how far will the Fed raise interest rates in response? The possible answers span the full range of possibilities, from President Biden’s cheery speech about “zero percent inflation” to the market bears predicting a full-blown economic depression.
Count David Kelly, JPMorgan’s chief asset management strategist, among the bulls. He is not convinced by the doomsayers and sees the recent decline in inflation as a sign that the worst is over. While the current conditions are still difficult, Kelly believes the stock market can and will show additional strength in the future. In his words, “I would be fully invested in equities right now, because I think equities could move higher here.”
So let’s follow JPM a little further down this path. The banking giant’s equity analysts have singled out two stocks they believe are poised to rise ahead — on the order of 40% or more. In fact, the JPM experts are not the only ones praising these stocks. According to the TipRanks platform, they are rated as Strong Buys by the street analysts. Let’s take a closer look at that.
JPM’s first choice is BeiGene, a clinical-stage biopharmaceutical company with, in his words, “a broad and deep pipeline” taking a shotgun approach to oncology. The company is developing a huge number of drug candidates, more than 50, both internally and in collaboration, to meet the treatment needs of approximately 80% of cancer malignancies. A pipeline of that size gives the company a competitive advantage over peers.
BeiGene is a truly international biotech company, active in Asia, Europe and the Americas, with administrative offices in Beijing, China, Cambridge, Massachusetts and Basel, Switzerland. From these offices, the company oversees its development and commercialization activities for its line of approved commercial phase products.
The leading approved products are zanubrutinib, branded Brukinsa, pamiparib, branded Partruvix, and tislelizumab, branded under its own name. As a group, these drugs are approved in several international jurisdictions for the treatment of various hematologic cancers and solid tumors. BeiGene has been actively commercializing them for several years and in 2Q22 the company had total sales revenue of $304.5 million. This number included $128.7 million from Brukinsa and $104.9 million from tislelizumab sales in China. The company’s total revenue, including collaboration costs, was $341.6 million, compared to $150 million in the same quarter a year ago.
Analyst Xiling Chen, who hedges stock for JPMorgan, believes BGNE offers a compelling risk reward. Kumar rates the stock as overweight (ie buy) along with a price target of $296, implying a 50% increase in one year.
Supporting his optimistic stance, Chen writes: “We view BeiGene stocks as undervalued given the quality of asset/growth and highlight the stock as one of our top picks in the industry… BeiGene has grown into a fully integrated biopharma company with the best in-class clinical development capabilities, one of the largest and best commercial oncology platforms in China, and unparalleled collaboration skills with global biopharma companies.We expect the company’s 16 commercial assets and broad pipeline to drive highly attractive, diversified long-term growth. We remain moderately below consensus on long-term sales, we see additional pipeline traction as an advantage over our estimates…”
Overall, 6 Wall Street analysts responded to this biotech giant, leaving 5 buy recommendations to 1 hold for a strong buying consensus. The shares are priced at $192.77 and their average price target of $253.76 points to ~29% upside potential in the coming months. (See BGNE stock forecast at TipRanks)
Xenon Drugs (XEEN)
The second stock we’re looking at is Xenon, another clinical-stage biopharma company. Xenon is developing new therapeutics in the field of neurology, seeking new drugs to treat neurological disorders with significant unmet medical needs. The company has a particular focus on treatments for epilepsy.
Xenon has two leading drug candidates in this area, XEN496 and XEN1101, in Phase 3 and Phase 2 trials, respectively. XEN496 is Kv7 potassium channel opener and is being investigated for a rare pediatric form of epileptic seizure. The company expects to complete the Phase 3 EPIK study of XEN496 in 2023.
However, XEN1101 is the company’s flagship candidate. It is currently undergoing several Phase 2 trials for epilepsy with focal seizures (FOS), primary generalized tonic-clonic seizures (PGTCS), and major depression. The Phase 2b X-TOLE study, against FOS, is expected to be completed this year, and the company has two identical Phase 3 studies, X-TOLE2 and X-TOLE3, in preparation to conduct when the current study is completed. completed. The Phase 3 studies will run in parallel and enroll up to 360 patients.
Xenon is also planning the X-ACKT Phase 3 trial, to continue its investigation into the efficacy of XEN1101 against PGTCS. This study will be conducted concurrently with the X-TOLE trials.
Finally, Xenon is in Phase 2 X-NOVA trial to evaluate XEN1101 against major depressive disorder. The topline results of this X-NOVA study, which included 150 patients, are expected in 2023.
JPM analyst Tessa Romero sees XEN1101 as the key driver in this share and clearly explains why: “Based mainly by compelling Phase 2b X-TOLE data and positive feedback from physicians, we view XEN1101 as having a high probability of success as an adjunct treatment in the leading indication of seizures with focal onset (FOS) At the same time, we also see the potential for XEN1101 to work in both patients with focal and/or generalized seizures and predict ~$1 billion in peak sales in the US alone in the combined epilepsy indications (~$700 million is FOS) where our estimates may turn out to be conservative.”
“We believe there is an opportunity in XENE stocks at current levels that do not adequately reflect XEN1101’s potential to expand into additional high unmet need indications outside of FOS, where there are compelling emerging reasons,” the analyst added. up.
Romero rates shares in XENE as Overweight (ie buy), and its $55 price target implies a 46% increase by the end of next year. (To view Romero’s record, click here)
Wall Street is clearly bullish on this biopharma as all 8 recent analyst reviews are positive – for a unanimous Strong Buy consensus rating. The stock is selling for $37.57 and the average price target of $51 suggests upside potential of about 36% over a year. (See Xenon stock forecast at TipRanks)
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Disclaimer: The opinions expressed in this article are those of the recommended analysts only. The content is for informational purposes only. It is very important to do your own analysis before making any investment.