There has been a major change in the economic outlook for 2025, in the wake of last month’s elections. The prospect of a second Trump administration, with its well-known preference for deregulation and tax cuts, has market watchers expecting a growth-friendly environment.
Desh Peramunetilleke, Jefferies Global Head of Quantitative Strategy, notes that reduced regulation, combined with the potential for lower corporate tax rates, could significantly boost the biotech sector, with smaller biotech stocks likely to benefit the most.
“Our recent analysis ended with a short-term bias towards smaller biotech names in the US… Trump’s victory brings new market dynamics into play. First, its policies on taxation and government regulation imply a more risk-taking environment, encouraging investment and mergers and acquisitions. This is conducive to the revaluation of the smaller biotech names,” Peramunetilleke explains.
Following his lead, Jefferies equity analysts picked two small biotech stocks with strong upside potential, including one with a potential upside of nearly 1,000%.
In fact, Jefferies analysts aren’t the only ones praising these stocks. They are both rated as ‘Strong Buys’ by analyst consensus, according to the TipRanks database. Let’s take a look at what makes these stocks such attractive investment opportunities right now.
Metagenomi (MGX)
The first Jefferies pick we look at is Metagenomi, a biotech innovator unlocking the potential of gene editing through the power of metagenomics. This approach focuses on identifying microbial genetic systems shaped by nature and tailoring their enzymes into precise tools for tackling various diseases. By utilizing the vast genetic diversity found in nature, Metagenomi aims to develop therapeutic solutions that can contribute to meaningful advances in modern medicine.
The company’s flagship candidate, MGX-001, is a novel therapeutic targeting hemophilia A (hemA). Last quarter, Metagenomi announced a major achievement: achieving sustainable Factor VIII activity levels over a one-year period in a NHP (non-human primate) study. The company has continued to initiate IND advancement activities for MGX-001 as a regulatory step toward moving the program to the human clinical trial phase.
But Metagenomi doesn’t stop there. Through a partnership with Ionis Pharmaceuticals, the company is integrating RNA-targeted therapies with its gene editing systems. This collaboration focuses on cardiometabolic development programs, initially targeting four conditions, including transthyretin amyloidosis (TTR) and refractory hypertension (AGT). These programs are currently in the lead optimization phase and have demonstrated proof-of-concept in rodent models. Looking ahead, Metagenomi plans to nominate one to two development candidates by 2025.
With early clinical progress and a share price as low as $1.85, Jefferies analyst Maury Raycroft believes MGX stock represents a big opportunity.
“We continue to view MGX stock as undervalued given: 1) de-risking 1-year NHP data, paving the way for sustained FVIII expression for hemA; 2) broad platform play with multiple genome editing capabilities, along with in-house GMP manufacturing capabilities – could facilitate multiple BD deals with initial PoC studies; 3) ION collaborative cardiometabolic programs moving towards DC nomination by 2025, achieving rodent POC,” said Raycroft.
“While first human testing may not begin until 2026 in the leading hemA and PH1 programs, animal PoC data in >2024 across their portfolio, along with potential BD deals, could further strengthen the platform, which could potentially send the shares higher given its broad applicability and discounted valuation. ,” the analyst added.
So, how high could this go? Raycroft rates MGX a Buy rating, with a $21 price target, indicating a notable upside potential of 1,035%. (To view Raycroft’s track record, click here)
Like Raycroft, other Wall Street analysts are optimistic about the prospects of this biotechnology. With five committed buys in the last three months, the message is clear: MGX is a strong buy. Should the average price target of $17.50 be achieved, a twelve-month gain of ~846% could be in store. (To see MGX stock forecast)
Next on Jefferies’ radar is Structure Therapeutics, a clinical-stage biopharmaceutical company focused on developing novel treatments for chronic conditions, particularly metabolic and pulmonary diseases that have, in the jargon, “major unmet medical needs.” .
Structure’s technology is based on G protein-coupled receptors (GPCRs), which constitute the largest family of human membrane proteins. GPCRs are involved in most aspects of human physiology, and more than 100 of these proteins are acted upon by some 475 drugs on the market. While that seems like a lot, there’s still a big market here: more than 220 of these proteins are still available as targets for clinical research.
The company’s lead drug candidate is GSBR-1290, an orally dosed small molecule agonist of the glucagon-like peptide-1 (GLP-1) receptor. GLP-1 has been validated as a useful drug target in the treatment of obesity as well as metabolic disorders such as diabetes mellitus type 2. The drug was developed on the Structure platform as a biased GPCR agonist, which selectively activates the G protein signaling pathway. GSBR-1290 is currently being investigated in clinical trials as a treatment for obesity.
These studies have now entered the Phase 2 phase and in June the company released a series of positive data from the earlier Phase 2a study. Last month, Structure announced that its follow-up study, the Phase 2b ACCESS trial, had begun dosing patients.
In addition to GSBR-1290, Structure is advancing the development of an orally administered small molecule amylin receptor agonist for the treatment of obesity. The company aims to complete a development candidate by the end of the year.
Reporting on this company for Jefferies, analyst Roger Song notes the success – and future potential – of GSBR-1290, writing about the program: “OW data confirms the industry-leading efficacy of GSBR1290, with PK/PD modeling suggests long-term WL is in line with orfo/sema supporting ‘1290 to Ph2b in 4Q24… With promising Ph2a 12W data in hand and Ph2b 36W data expected in Q4 25 we see ‘1290 leading the way in next generation small molecule incretin, and could potentially set the new benchmark if we can see a trending higher WL with higher doses and improved GI tolerance with a dose of 120 mg.’
Song has also noted the Amylin program and is optimistic about the company’s ability to develop a competitive drug candidate: “The excitement about the Amylin program continues, with the first DC announcing YE24 and several others plans. Comparative data from AZD5004 and AZD6234 are both disappointing, further strengthening GPCR’s leadership position with a robust pipeline.”
The potential inherent in these two programs led Song to rate Structure stock as a Buy, while his $79 price target indicates ~137% one-year upside potential. (To view Song’s track record, click here)
All told, Structure has received nine unanimously positive ratings from analysts, supporting a Strong Buy consensus rating. The stock is currently trading at $33.35, and the average price target of $88.56 implies a gain of 165% over the next twelve months. (To see GPCR Stock Prediction)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is for informational purposes only. It is very important to do your own analysis before making an investment.
