Barclays backs biotech with fresh calls on oncology and immunology stocks

Investing.com -- Barclays has initiated coverage on a group of small- and mid-cap biotechnology companies focused on oncology and immunology, highlighting both opportunities for growth and ongoing risks in the sector. 

The brokerage launched coverage of eight companies with a mix of Overweight and Underweight ratings, while also assuming coverage of five more. 

Analysts said, “we believe that positive clinical data remains the chief driver of biotech stock outperformance and recommend that investors focus on pockets of innovation.” 

C4 Therapeutics was initiated at “overweight” with an $8 price target, representing a 193% upside from its Sept. 11 close of $2.73. 

Barclays pointed to early but encouraging data for its lead asset, cemsidomide, which is being developed for multiple myeloma and non-Hodgkin lymphomas. 

Janux Therapeutics also received an “overweight” rating, with a $47 price target versus $25.12, reflecting an 87% upside. Its prostate cancer drug candidate JANX007 has shown “highly encouraging clinical data” in late-line treatment.

Kymera Therapeutics was rated “overweight” with a $60 target compared to $46.20, a 30% upside, with Barclays noting that “if KT-621 atopic dermatitis data hits, the stock’s just getting started.” 

Merus N.V. received an “overweight” rating and a $112 price target versus $69.80, a 60% upside, supported by its antibody platform and ongoing Phase 3 programs. 

Protagonist Therapeutics was given an “overweight” rating with a $72 target against $59.68, a 21% upside, with Barclays citing its oral peptide technology. 

Scholar Rock was set at “overweight” with a $45 target versus $31.84, reflecting a 41% upside, driven by its lead drug apitegromab for spinal muscular atrophy. 

Terns Pharmaceuticals was initiated at “overweight” with a $15 price target compared to $7.44, implying 102% upside, with its lead leukemia candidate expected to show data in the fourth quarter.

By contrast, Summit Therapeutics was initiated at “underweight” with a $13 target against $18.60, representing a 30% downside. Barclays said it does not yet see enough differentiation in lung cancer to justify higher expectations. 

Coverage was also assumed for Arvinas at “overweight” with a $16 price target, CytomX Therapeutics at “overweight” with a $3.50 target, Exelixis at “equal weight” with a $40 target, MacroGenics at “overweight” with a $3 target, and Xencor at “underweight” with a $6 target.

The analysts also include EPS estimates for the current and next fiscal years, as well as cash runway guidance, with Merus funded through at least 2028 and Protagonist through year-end 2028. 

Barclays applies a sum-of-the-parts discounted cash flow model, assigning probabilities of success of 15%, 35%, and 65% for Phase 1, 2, and 3 assets respectively.

“Oncology and Immunology are mega-categories in biotechnology; and despite increasing competition in certain areas within these categories as well as the complex nature of biotechnology, we’re positive on the outlook in biotech,” the analysts said.

Barclays said stock picking will remain critical as indices underperform broader markets, but it sees “ meaningful opportunities for stock upside through year-end 2026.”