2 ASX biotech shares Bell Potter just upgraded to buy

These biotech shares could be high risk/high reward options.

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If you have a high tolerance for risk, then read on! That's because Bell Potter has just upgraded two ASX biotech shares to buy ratings this morning.

Here's why the broker is feeling upbeat about these high-risk stocks:

Genetic Signatures Ltd (ASX: GSS)

According to the note, the broker has upgraded this global molecular diagnostics company's shares to a speculative buy rating with a trimmed price target of 90 cents. This implies a 78% upside from current levels.

Bell Potter sees a number of catalysts on the horizon which it feels could give the ASX biotech share a major boost. The broker explains:

We upgrade our recommendation to Buy (Speculative) with valuation of $0.90. The key potential catalysts are FDA 510(k) clearance for the Gastrointestinal Parasite kit, US commercial launch, completion of Respiratory kit clinical trial and broader engagement within the domestic and European market.

Mesoblast Ltd (ASX: MSB)

Bell Potter has also upgraded this ASX biotech share to a speculative buy rating with a 58 cents price target. This suggests a potential upside of 57% for investors.

While the broker was disappointed with the company's FDA blow last month, it highlights that early paediatric approval for remestemcel-L in GvHD remains an option for the allogeneic cellular medicines developer.

Subject to successfully generating new data, the broker estimates the company could resubmit the Biological License Application in the first quarter of 2024 followed by a two-month review period from the US FDA.

However, the real driver of its upgrade was Mesoblast's valuation. It explains:

There are no changes to earnings and valuation remains unchanged at $0.58. We upgrade to Buy (Speculative) based on share price movement. The announcements discussed here are encouraging for a potential approval in FY24, however, markets are likely to remain unconvinced until the FDA provides an approval.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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