Why this broker just upgraded Telix shares to a buy rating

Bell Potter thinks a recent pullback has created a buying opportunity.

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Although Telix Pharmaceuticals Ltd (ASX: TLX) shares have been on fire over the last 12 months, they have recently pulled back.

For example, since peaking at a record high of $19.06 earlier this month, the radiopharmaceuticals company's shares have pulled back by approximately 14% to $16.46.

This hasn't gone unnoticed by analysts at Bell Potter. So much so, the broker believes that investors should be taking advantage of this weakness to snap up the company's shares.

What is the broker saying about Telix Pharmaceuticals shares?

According to the note, the broker has upgraded the company's shares to a buy rating with a $19.00 price target.

Based on where Telix Pharmaceuticals shares currently trade, this implies potential upside of 15.5% for investors over the next 12 months.

Bell Potter believes the pullback is related to its plan to raise funds through a Nasdaq IPO, which is currently taking place. But it feels that smart investors will see this as an opportunity to pick up shares before some potentially positive news is released. It said:

Following the launch of the offer in early June, the stock is trading 14% below its recent high ($19.06) which is likely to be at least in part attributable to an overhang from the raise. The pullback represents an opportunity to buy the stock ahead of an exciting period of news flow over the second half of the CY24 which will include potential FDA approvals for Zircaix and Pixclara.

Clinical programs

The broker highlights that the company is making significant progress with its clinical programs and the funds raised from the Nasdaq listing will accelerate this. It commented:

The clinical trial risk associated with the readout of ProstACT Select is now behind the company. Commencement of enrolment in ProstACT Global in the US is expected to commence next quarter and this will be one of several clinical programs in prostate cancer across both therapy and imaging. The company will also move forward with the development of TLX592 (being its alpha emitter).

It also notes that STARLITE II data is expected in the coming months. It adds:

In renal cancer, the company is expected to readout data from STARLITE II in 2H24. Subject to these results, the renal cancer therapy program will become the third therapeutic candidate behind TLX591 (prostate) and TLX101 (Gliioblastoma). As each of these programs begins to readout data in the coming periods, there is a very significant potential for further value accretion. We highlight this potential with a brief summary of recent transactions in the space, noting that the therapies drive these transactions rather than imaging assets.

All in all, Bell Potter appears to believe these are promising times for Telix Pharmaceuticals shares and its shareholders.

Motley Fool contributor James Mickleboro has positions in Telix Pharmaceuticals. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Telix Pharmaceuticals. The Motley Fool Australia has recommended Telix Pharmaceuticals. 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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