Citi names 3 biotech stocks to play a growing $2.9 billion opportunity — giving one about 50% upside

Published Tue, Apr 30 20247:14 PM EDT

The outlook is starting to look bright for biotech stocks, according to some. With markets now expecting the first rate cut to be in September rather than June or July, as previously thought, biotech stocks could start to do well. Earlier this month, Morgan Stanley analysts noted that biotech stocks outperform in the months leading up to an initial rate cut, though they underperform in the initial period after rates are lowered. Biotech encompasses many different areas, but Citi has identified one with a $2.9 billion market — which it says is set for even more growth. That's hereditary angioedema, a genetic condition which causes swelling under the skin, lining of the guts and lungs, and possibly other body parts. It could be life-threatening, depending on which area the attacks involve. According to Citi, the market for it is set to grow by mid-single digit over the next five years. "The market is about to become even more competitive with a number of therapies in development," Citi said in an April 26 note. The Wall Street bank named three companies with treatments for this condition. They are U.S. firms Ionis Pharmaceuticals and Intellia Therapeutics , as well as Australia's CSL . CSL's treatment Garadacimab has "best-in-class efficacy" and has the potential to become the "standard of care" once launched in 2025, said Citi. "CSL has demonstrated over the last 25 years that it can deploy capital at a high rate of return, and has been able to consolidate the global plasma industry to the point where the market structure is well balanced," said Citi. It gave CSL a price target of $305, or nearly 11% potential upside. However, Ionis' medicine Donidalorsen could offer more convenience than Garadacimab as it requires less frequent dosing (every eight weeks) than Garadacimab (monthly), the bank noted. "Considering current valuation and overall pipeline potential, the risk/reward profile of the shares appears positively skewed," Citi said of Ionis. It gave Ionis a buy rating and a price target of $60, implying about 44% upside. As for Intellia, Citi said its gene editing platform, dubbed "CRISPR/Cas9," is "truly innovative" and could "eventually be a transformational modality that could benefit numerous diseases and indications." It gave Intellia a price target of $31, or 49% potential upside.