Analysts see over 50% gains in these 2 mid-cap biotech stocks

Key Points

• Over the last three months, U.S. biotech stocks are up approximately 15% and have outperformed the broader healthcare sector.
• Last week, biopharma company Madrigal Pharmaceuticals received a bullish endorsement from five analysts after publishing positive clinical trial results.
• Given Beam Therapeutics’ advancing pipeline and potential to reshape the gene editing landscape, its stock has returned to traders’ radar.

2024 is shaping up to be a pivotal year for the biotechnology industry.

In recent years, emergency Covid vaccines have ushered in several groundbreaking innovations that have changed the way drugs are developed and health care is administered. Advancements in the treatment of cancer, Alzheimer’s disease and obesity have highlighted steady progress in the field. 

This year, biotech companies are expected to build off last year’s breakthroughs and embrace emerging trends. Not surprisingly, artificial intelligence (AI) is poised to play a big role in drug and protein discovery. RNA technologies are expected to become more sophisticated and have a bigger impact on cancer and HIV treatment. CRISPR technology that uses specific delivery systems to target various diseases is gaining momentum.

With these and other trends expected to drive life-changing discoveries, biotech will be an exciting group to watch in 2024. Combined with recent clinical trial successes, the outlook for growth has made biotech one of the hottest investments of late. 

Over the last three months, U.S. biotech stocks are up approximately 15% and have outperformed the broader healthcare sector. If the market’s ‘risk-on’ sentiment persists, volatile biotech shares could continue to deliver outsized gains.

This month, bullish pipeline news, analyst commentary and M&A deals have sparked rallies in multiple mid-cap biotech names. ImmunityBio and CymaBay Therapeutics are just two examples. 

But with these and other stocks trading near highs, companies recovering from 52-week lows could have more explosive upside. Wall Street sees big comeback gains ahead in these two biotechs.

Why are analysts bullish on MDGL? 

Last week, five Wall Street analysts issued buy ratings on Madrigal Pharmaceuticals, Inc. NASDAQ: MDGL. Their average price target is $332.50, which implies 54% upside from Monday’s close. 

The bullish endorsement came after the biopharma company published positive Phase 3 trial results for its investigational drug resmetirom for the treatment of nonalcoholic steatohepatitis (NASH). Madrigal’s lead candidate achieved both of the study’s primary endpoints and demonstrated a favorable safety profile. The FDA granted resmetirom Priority Review and set March 14, 2024 as the target date to complete its review. If approved, it would become the first medicine approved for NASH, a disease that affects an estimated 1.5 million U.S. patients. 

Madrigal’s potential to improve the lives of Americans diagnosed with NASH and other liver diseases could not only lead to strong financial results but also make it an attractive acquisition target to a larger biotech company. The stock price rose to $322.67 in May 2023 but has since pulled back by more than $100.00.

What is the consensus price target on BEAM?

Over the last three months, price targets on Beam Therapeutics Inc. NASDAQ: BEAM have averaged $55.00. Shares of the precision genetic medicines developer jumped 15% on Monday despite an absence of company news. Gilead Sciences announced the acquisition of mid-cap biotech CymaBay Therapeutics, sparking speculation that the similarly-sized Beam Therapeutics could be a target as industry M&A activity heats up. 

In spite of the surge, BEAM sits more than 60% away from Wall Street’s consensus price target. Two weeks ago, J.P. Morgan upgraded Beam Therapeutics from Neutral to Overweight, becoming the fifth consecutive firm to call the stock a buy in 2024.

Earlier this year, the company reported progress across its hematology and genetic disease portfolio in addition to outlining anticipated trial milestones around its sickle cell disease (SCD) and genetic disease franchises. Initial data from the BEACON trial for investigational SCD cell therapy BEAM-101 is expected to be released in the second half of 2024. The first clinical trial for genetic disease candidate BEAM-302 could begin as early as the first half of 2024.

Given Beam Therapeutics’ advancing pipeline and potential to reshape the gene editing landscape, its stock has returned to traders’ radar after slipping as low as $16.95 in October 2023. BEAM also garners a lot of attention because it is a top 20 holding of famed portfolio manager Cathie Wood’s ARK Innovation ETF (ARKK). ARKK contains several other promising biotech names, including CRISPR Therapeutics and Intellia Therapeutics.