2025 has been a tough year for Telix Pharmaceuticals Ltd (ASX: TLX) investors.
Since the start of January, shares in the cancer diagnostics specialist have dropped by 31% to $16.38 per share at Tuesday's close.
In comparison, the benchmark All Ordinaries Index (ASX: XAO) has risen by about 8% during the same period.
However, the slump in Telix shares may have opened the door to a potential buying opportunity.
Late last week, renowned investment firm Citigroup Inc (NYSE: C) initiated coverage on the company for the very first time.
It issued a buy rating for Telxi shares and provided an outlook that points to significant upside potential.
Let's take a closer look at Citi's reasoning.
Specialist in disease diagnostics
Broadly speaking, Telix is developing a portfolio of clinical and commercial-stage products for the diagnosis of prostate, kidney, brain, and musculo-skeletal diseases.
It generates most of its revenue from the sale of Illuccix – an imaging agent used in PET scans to help healthcare professionals detect prostate cancer.
So far, Illuccix has been approved for commercial use in 23 countries.
In Australia, the product first hit the shelves in early 2022. Sales of the diagnostic agent in the lucrative US market followed soon after.
In H1 FY25, strong Illucix sales helped the company generate US$390.4 million in revenue, up by 63% from the previous corresponding period.
Management noted that the robust financial performance facilitates re-investment for future growth.
Here, Telix increased its research and development (R&D) investment by 47% as it looks to move its pipeline of products towards commercialisation.
In essence, the company seeks to bring numerous other diagnostic products to market in upcoming years.
Besides Illucix, it has also secured approval from the US Food and Drug Administration (FDA) for Gozellix – another imaging agent for prostate cancer.
Gozellix offers a longer shelf-life and an extended distribution radius compared to existing gallium-based alternatives.
Citi sets price target for Telix shares
Citi's buy rating for Telix shares appears to have been timed to aplomb.
On Tuesday, the company's share price raced higher after announcing a breakthrough in its commercial strategy for Gozellix.
That said, Citi's optimism appears to extend well beyond a single product, as reported on Friday in the Financial Review.
Citi labelled the group's prostate cancer product TLX591 as a potential "blockbuster drug", and noted that every project it formally valued carries further upside potential.
On that basis, the broker set a price target of $34.00 per share, implying that the stock could more than double from $16.38 at yesterday's close.
Citi added that Telix shares could reach as much as $71 per share if all further upside potential is achieved.
However, the broker cautioned that the opportunity comes with elevated risks.
Alongside its buy recommendation, it assigned a high-risk rating for Telix shares.
