Analysts at UBS have initiated coverage on 89bio (ETNB) with a ‘Buy’ rating and a US$36 price target, representing an upside of about 117.5% from the biotechnology company's current share price of US$16.55.
The analysts believe 89bio’s differentiated investigational therapeutic FGF21 analog pegozafermin (PGZ) has high potential in non-alcoholic steatohepatitis (NASH), an advanced form of non-alcoholic fatty liver disease characterized by inflammation and fibrosis of the liver that can progress to cirrhosis, liver failures, and liver cancer.
They view the NASH market as a whole as an underappreciated opportunity and said FGF21 class therapeutics could lead the field longer-term.
They also believe NASH is unlikely to be a winner-takes-all market, noting that Akero Therapeutics' efruxifermin (EFX) has a potential edge on some efficacy points in the data to date.
“Although there are competitors in the FGF21 space, we think upcoming AKRO Phase 2b NASH cirrhosis data in 4Q is a catalyst for both stocks, and we think this study is likely to be supportive of FGF21's broad potential in NASH,” the analysts wrote in a note to clients.
“We see room for many assets with different profiles and administrations.”
They wrote that their belief that AKRO's EFX has shown some advantages when compared to 89bio’s PGZ in the data to date is reflected in shares prices, with Akero's market capitalization of $2.6 billion more than double 89bio's at $1.2 billion.
“We think this leaves room for upside for both stocks if investors get more confident in the FGF21 opportunity in the NASH F4 space,” they wrote.
Going into AKRO’s 4Q data readout, the analysts see a favorable risk/reward profile for 89bio.
“If successful—which we think is likely—we think ETNB shares could potentially trade up about 50% to 80% (about $24 to $29 per share) versus a miss, potentially down about 25% to 40% (about $10 to $12 per share),” they wrote.
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