JP Morgan upgrades two biotech companies amid 'optimistic' outlook

Published Thu, Feb 15 20184:01 PM ESTUpdated Thu, Feb 15 20184:09 PM EST

J.P. Morgan alerted clients to two biotech companies that it believes could outperform peers in the next year. Though bullish biotech as a whole, analysts at the firm announced that they were upgrading a pair of stocks to overweight. "Overall, we remain optimistic about the outlook for biotech in 2018, despite recent volatility giving back some early outperformance to start the year," wrote analyst Cory Kasimov on Wednesday. "Indeed, the combination of continued innovation, a constructive FDA, and ready access to capital markets, all under the auspices of an omnipresent M & A backdrop, presents a compelling setup." Here are the two stocks J.P. Morgan upgraded to overweight during the firm's ongoing rating rebalancing. 1) Seattle Genetics ( SGEN ) Kasimov upgraded Seattle Genetics to overweight from neutral, citing the company's pipeline and a favorable risk versus reward outlook. "After a period of relative underperformance, we see a compelling opportunity for Seattle Genetics in the form of a solid launch for Adcetris in frontline Hodgkin Lymphoma … Seattle Genetics is a fully integrated oncology company that's well on its way to becoming a multi-product commercial enterprise with a proprietary, market-leading antibody drug conjugate platform and the potential to produce distinctively long-tailed assets." The analyst increased his price target to $66 from $60, representing 22 percent upside from Wednesday's close. 2) Zai Lab (ZLAB) Analyst Anupam Rama likes Zai Lab, highlighting its cancer treatment pipeline and telling investors that this could be a "long-term entry point." "We continue to view Zai Lab as an attractive healthcare emerging markets story in China — a region that has historically been somewhat of a black box for pharma/biotech. Since its initial public offering in September 20, 2017, Zai Lab shares have pulled back about 25 percent … Indeed, Zai has executed on clinical and regulatory timelines, which we believe underscores that CFDA reform is having legitimate pull-through on novel innovation." Rama increased his price target on the company to $35 from $32, representing 44 upside from Wednesday's close.

A scientist works at Zai Lab's drug development facility in Shanghai, China.

Adam Jourdan | Reuters

J.P. Morgan alerted clients to two biotech companies that it believes could outperform peers in the next year.

Though bullish biotech as a whole, analysts at the firm announced that they were upgrading a pair of stocks to overweight.

"Overall, we remain optimistic about the outlook for biotech in 2018, despite recent volatility giving back some early outperformance to start the year," wrote analyst Cory Kasimov on Wednesday. "Indeed, the combination of continued innovation, a constructive FDA, and ready access to capital markets, all under the auspices of an omnipresent M&A backdrop, presents a compelling setup."

Here are the two stocks J.P. Morgan upgraded to overweight during the firm's ongoing rating rebalancing.