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According to JPMorgan CEO Jamie Dimon, the US is on the cusp of an economic boom which should fuel growth at least until 2023. Dimon attributes the prospect of strong growth to several reasons.
“I have little doubt that with excess savings, new stimulus savings, huge deficit spending, more QE, a new potential infrastructure bill, a successful vaccine and euphoria around the end of the pandemic, the U.S. economy will likely boom,” Dimon recently said.
Although Dimon also noted that stock market valuations are “quite high,” the fact markets are pricing in economic growth and surplus savings that could be parked into equities, suggests a multi-year boom could serve as justification for present levels.
Accordingly, the analysts at J.P. Morgan have been eyeing this opportunity and have homed in 2 stocks with the long-term view in mind, for which they anticipate some outsized growth.
We ran JPM’s stock picks through the TipRanks database to see what the rest of the Street makes of these choices. Turns out JPM is not alone. The consensus is that both names are Strong Buys and set to generate massive returns – at least 90% over the next 12 months. Let’s dive in.
CytomX Therapeutics (CTMX)
We will kick off with CytomX, a clinical-stage biopharmaceutical company with lofty ambitions. CytomX wants to revolutionize cancer treatment and to do so it bases therapies on its proprietary Probody Technology Platform.
By directly targeting the tumor microenvironment, Probody creates conditionally activated biologics, thereby, more effectively localizing the treatment of the tumor, and at the same time keeping a lid on activity in healthy tissues.
CytomX has a pipeline with several drugs in various stages of development; Praluzatamab (CX-2009), a Probody drug conjugate (ADC) against CD166 (a molecule expressed in solid tumor cells), is in a Phase 2 clinical trial for the treatment of breast cancer. Furthermore, the company and partner AbbVie are co-developing CX-2029, a PROBODY drug conjugate targeting CD71 (transferrin receptor). The drug is in Phase 2 studies for the treatment of squamous non-small cell lung cancer, head and neck squamous cell carcinoma, esophageal and gastro-esophageal junction cancers, and diffuse large B-cell lymphoma.
The Probody platform forms the basis of J.P. Morgan’s Anupam Rama thesis for CytomX.
"In our view, the platform is not only de-risked by known clinical data for lead assets praluzatamab ravtansine (CX-2009) / CX-2029 but also external partnerships with the likes of AbbVie (for CX-2029), Amgen, Bristol Myers Squibb, and Astellas. Of note, we view early data for lead development candidates praluzatamab and CX-2029 in multiple tumor types as interesting early proof-of-concept," Rama opined.
Both praluzutamab and CX-2029 have “shown early clinically activity,” and in 4Q21 will have phase 2 readouts. Rama believes that so far, “due to uncertainty around the ultimate therapeutic window of these assets,” the Street is underappreciating the results. The readouts could change all that and have the potential to “further validate not only the programs individually but the platform as well.”
“Importantly,” Rama added, “We would note that the phase 2 updates in 4Q21 for both products will be important for not only understanding the therapeutic window for each product, but also to learn about key metrics for the model such as response rate / durability.”
To this end, Rama rates CTMX an Overweight (i.e. Buy) along with a $14 price target. Investors stand to pocket a 98% gain, should the figure be met over the next 12 months. (To watch Rama’s track record, click here)
Over the past 3 months, 3 other analysts have chimed in with a CytomX review and all are of the same mind – recommending to Buy. At $14, the average price target is the same as Rama’s and provides robust back up to the stock’s Strong Buy consensus rating. (See CTMX stock analysis on TipRanks)
Kala Pharmaceuticals (KALA)
The next JPMorgan pick we're are looking at is Kala Pharmaceuticals. The company focuses on developing treatments for eye diseases and has two FDA approved products on the market; Inveltys, Kala’s eye drops for post-surgical inflammation/pain was approved in 2018 and launched in 2019. More recently, last October, the FDA gave its nod of approval for Eysuvis, the company's treatment of signs and symptoms of dry eye disease (DED).
Eysuvis was launched in January and is currently the only FDA approved prescription treatment for the condition. Following talks with Kala management, J.P. Morgan’s Christopher Neyor notes the reaction so far has been excellent.
“Kala continues to receive very strong positive feedback on the initial Eysuvis launch from key stakeholders including patients and physicians where the two most common themes center on (1) rapid onset of action for the product with many patients reporting relief of symptoms beginning on the first day and (2) comfort of the eye drop with no meaningful tolerability issues, which sharply contrasts with the burning, stinging, and blurred vision symptoms experienced with other dry eye therapies,” Neyor wrote.
The dry eye market, says Neyor, represents a significant opportunity, with roughly 17 million US diagnosed patients. The analyst’s “conservative” long-term peak sales forecast for Eysuvis stands at over $750 million and Neyor anticipates a strong sales push in the year’s latter half should “de-risk the company’s dry eye commercialization plans.”
Underpinned by Eysuvis, Neyor sees a “highly favorable risk/reward for Kala,” which is reflected in a bullish price target. At $17, the figure is set to reward investors with 12-month returns of 125%, should Neyor’s thesis play out accordingly. Unsurprisingly, Neyor has an Overweight (i.e. Buy) rating on the shares. (To watch Neyor’s track record, click here)
Looking at the consensus breakdown, the J.P. Morgan analyst’s forecast appears on the more conservative end of the spectrum. Going by the $26 average price target, the shares are expected to surge by ~262% in the year ahead. Kala’s Strong Buy consensus rating is based on a unanimous 4 Buys. (See Kala stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.