Jefferies predicts a rally of up to 270% for these 2 “Strong Buy” stocks.

While inflation eased to 2.9% in July, interest rates remain high, with the Federal Reserve’s key rate currently between 5.25% and 5.50%. However, the Fed is expected to start cutting interest rates as early as next month.

A rate cut is likely to have knock-on effects across sectors, with the biotech industry particularly affected. Biotechnology companies, which often operate with significant overhead costs, are particularly sensitive to changes in interest rates. But with a rate cut likely in the future, market dynamics for the biotech could see a favorable shift in the coming months.

Regardless of the Fed’s next move, however, Jefferies analyst Michael Yee suggests the biotech sector’s financial health is stronger than it might appear.

“As we move into the second quarter, our updated EV/cash tracker shows that Smid Biotech (up to $5B) is attractive and cheap… The biotech’s cash position remains strong with average cash balances of nearly $200 million and a median runway of over 2 years. and higher than the historical average – given a lot of money raised in the last 12 months of tracking… The sector is healthy and well-funded, with an average of 2.3 years of cash to support key data readings,” said Yee .

Building on this, Jefferies analyst Maury Raycroft is targeting two biotech stocks in particular, arguing that they are well-positioned to deliver strong returns over the next year – in one case, as much as 270%.

Using the TipRanks database, we looked at the big picture of both picks, and it looks like the rest of the Street agrees with Jefferies’ view — both are rated strong buys by the analyst consensus. Let’s see why they are getting applause everywhere.

Inozyme Pharma (INZY)

The first Jefferies pick we’ll look at is Inozyme Pharma, a clinical-stage biotech company focused on addressing three severe and rare diseases that affect the bone, vascular and soft tissue systems. These conditions are related to a common underlying problem: disturbances in the body’s bone mineralization process. When this process goes wrong, it can lead to chronic, irreversible and debilitating diseases. In response, Inozyme developed an innovative therapeutic agent, INZ-701, which has demonstrated efficacy in treating mineralization disorders caused by ENPP1 and ABCC6 gene deficiencies.

The Company currently has three ongoing clinical trial programs for INZ-701, the most advanced of which are focused on treating ENPP1 deficiency. Inozyme expects to complete enrollment in ENERGY-3, a pivotal pediatric Phase 3 study for this indication, this quarter, with topline data expected in the second half of 2025. Due to significant increases in PPi (primary objective) levels observed in the adult ENPP1 deficiency study, ENERGY-3 is considered a risk-free study. In addition, Inozyme plans to publish data from ENERGY-1, a Phase 1b study involving infants with ENPP1 deficiency, in Q4 2024.

The story continues

INZ-701 is also being developed to treat ABCC6 deficiency, a genetic condition that causes the calcification disorder Pseudoxanthoma elasticum (PXE). Following positive top-line data from an ongoing Phase 1/2 study involving 10 adult participants, the FDA granted the company Fast Track Designation in July. Meanwhile, preparations are underway for a Phase 3 study in ABCC6-deficient children and adolescents, which is expected to begin in Q1 2025, pending FDA approval.

But that’s not all – Inozyme is also exploring INZ-701’s potential to provide therapeutic benefits to patients with calciphylaxis as a result of end-stage renal disease (ESKD). The company has initiated the Phase 1 SEAPORT-1 study to evaluate the safety, tolerability, pharmacokinetics and pharmacodynamics of INZ-701 in ESKD patients undergoing hemodialysis, with interim data expected in Q4 2024.

For Jefferies analyst Maury Raycroft, all of this points to a bright future for Inozyme. He summarizes the near-term potential of the INZ-701 programs for investors, writing, “We believe the (Inozyme) market cap reflects the opportunity for ENPP1 deficiency with a small value attributed to PXE ($900 million peak revenue) and we expect an alignment of the regulations. on a pediatric pivot in fall 2024 to be a key catalyst (stock +30%/-10%). We believe the calciphylaxis opportunity represents another $1 billion in revenue that could be risked with ph.I interim data in 4Q (stock +20%/-10%), which is not rated in the stock…Critical Critical Biomarker PPi from INYZ ‘701 increased in a range similar to healthy volunteers in 2 ph.I/II in adults with ENPP1 deficiency and PXE, which we believe reduces the risks of all 3 clinical programs.”

In line with his bullish interpretation, Raycroft rates INZY stock a Buy, along with a $17 price target. Should the target be met, it could be a twelve-month gain of 271%. (To follow Raycroft’s history, click here)

Wall Street analysts can be a contentious lot — but when they agree on a stock, it’s a positive sign for investors to take note. This is the case for INZY as all 7 recent analyst reviews on the stock are Buy recommendations, making the consensus rating a unanimous Strong Buy. Currently trading at $4.58, the stock has an average price target of $16.60, suggesting a potential gain of 262% over the next year. (See INZY stock forecast)

Tango Therapeutics (TNGX)

Next up is Tango Therapeutics, a biotech firm dedicated to improving oncology treatments. Tango is working on the discovery and development of new drug agents capable of precisely targeting cancerous tumors. The company researches areas such as tumor suppressor genes and how they influence the ability of cancer cells to evade immune cell agents.

Specifically, Tango has developed a synthetic PRMT5 targeting program. PRMT5 is a crucial gene for cell survival, which makes it an attractive target in cancer treatment. However, conventional non-synthetic PRMT5 inhibitors have presented significant risks as they may be harmful to normal cells, especially bone marrow cells, in addition to cancerous ones. Therefore, a synthetic PRMT5 inhibitor represents a potentially groundbreaking advance in oncology.

Tango believes it can achieve this goal with its lead candidates, TNG908 and TNG462, both of which are currently in clinical trials. TNG908, an MTA-cooperative PRMT5 inhibitor capable of penetrating the blood-brain barrier, is in the dose-escalation phase of a phase 1/2 study. This study focuses on patients with solid tumors with MTAP deletion, including non-small cell lung cancer, pancreatic cancer and glioblastomas – tumors that have MTAP deletions, which are present in 10% to 15% of all human cancers, with an even greater increase. prevalence in glioblastomas.

The second candidate, TNG462, is poised to be a best-in-class MTA-cooperative PRMT5 inhibitor. It is also in a phase 1/2 trial currently testing two dose levels against various cancers, including non-small cell lung cancer, pancreatic cancer, bladder cancer, sarcoma, mesothelioma and cholangiocarcinoma. Tango anticipates releasing a comprehensive clinical data update for both PRMT5 inhibitors later this year.

Analyst Raycroft, in his coverage for Jefferies, is impressed that Tango has “two differentiated assets in the MTAP space” as well as future data catalysts. He says of the company: “We believe TNGX’s market opportunity is undervalued based on its unique positioning. ‘908 could gain significant market share in GBM given the strong unmet need (25% people survive 1 year with SOC). “462 could gain more market share over competitors if it can demonstrate a better efficacy/safety profile (as suggested by preclinical data).”

Looking to the future, Raycroft sees Tangos clinical programs as relatively low-risk compared to typical phase 1 oncology programs, noting that PRMT5 is a well-understood epigenetic target that leads to MTAP-del cell death. We believe that inhibition of PRMT5-MTA could lead to ≥30% ORR in some tumors, where approval of the histological diagnosis is a possible positive scenario.”

In summary, the analyst rates TNGX a Buy with a price target of $19 indicating 91% upside potential over the next year.

Do other analysts agree? I am Only Buy ratings have been issued in the last three months, 5 to be exact. So the message is clear: TNGX is a Strong Buy. Given the average price target of $14, the stock could rise 40.5% over the next year. (See TGTX Stock Forecast)

To find good ideas for trading stocks at attractive valuations, visit TipRanks’s Best Stocks to Buy, a tool that aggregates all of TipRanks stock information.

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.