Key Points
One analyst tracking the biotech upgraded her recommendation on its shares.
She now believes that they rate a buy, rather than a hold.
An influential bank raised upgraded shares of Recursion Pharmaceuticals (NASDAQ: RXRX) on Wednesday, and in response, investors piled into the stock. The clinical-stage biotech's equity zoomed 11% higher in price that trading session, which was particularly impressive given the broadly weak performance of many stocks across the day.
Recommendation change for the better
Well before market open, prognosticator Priyanka Grover of JPMorgan Chase unit J.P. Morgan changed her Recursion rating. She now feels it's worthy of an overweight (buy, in other words), up one full peg from her previous tag of neutral. She also raised her price target on the shares by 10% to $11 apiece.
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According to reports, Grover's new take is based largely on the highly encouraging clinical trial readout of the company's REC-4881 investigational drug. The medication, designed to treat familial adenomatous polyposis (FAP; a condition characterized by the development of polyps within the body), demonstrated efficacy in a Phase 1b/2 trial.
In the analyst's view, this drug has blockbuster potential, i.e. it could reach sales of over $1 billion annually. She also rates Recursion's chances of bringing it to market at 60%.
Self-discovery
I should caution here that, no matter how promising a pipeline medication might be throughout the various stages of clinical testing, its ultimate approval by regulators is never guaranteed. So, as always with biotech stocks, investors should approach Recursion with some level of caution.
Still, the recent investor excitement around REC-4881 is understandable and justified, particularly given that the drug was developed through Recursion OS, Recursion's proprietary, artificial intelligence (AI)-assisted discovery system.
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JPMorgan Chase is an advertising partner of Motley Fool Money. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool has a disclosure policy.
