There could be big returns waiting for investors in the healthcare sector according to analysts at Bell Potter.
In fact, the ASX healthcare share in this article is being tipped to almost double in value from current levels.
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Which ASX healthcare share?
The share in question is Neuren Pharmaceuticals Ltd (ASX: NEU).
It is a biotechnology company with two novel drug assets. Bell Potter notes that the most advanced is Daybue (trofinetide), which was out-licensed to Acadia (NASDAQ: ACAD).
The ASX healthcare share's second asset, NNZ-2591, is under development for multiple rare diseases. The most advanced is Phelan McDermid syndrome.
Neuren Pharmaceuticals is currently conducting a Phase three trial in Phelan McDermid syndrome and has conducted Phase 2 trials in three other rare neurological conditions.
Bell Potter believes the market is ascribing no value to NNZ-2591, which it feels has created a compelling buying opportunity for investors.
At the same time, it highlights that European regulators have reversed a negative recommendation on Daybue in the region, putting it on a likely path to approval.
Commenting on this, Bell Potter said:
The addition of Daybue European sales adds ~$2/share to our NPV valuation based on current forecasts. We estimate the future value of Daybue licensing income to be ~$9.50 (comprising ~$7.50 from the US and ~$2 from Europe). The existing ~A$300m cash balance equates to ~$2.50/share. Hence a total value of ~$12/share for cash + Daybue licensing income, excluding any contribution from NNZ-2591.
At the latest closing price, we therefore see effectively zero implied value for NEU's second asset, which in itself would be a multi-billion-dollar value asset should it succeed in the Phase 3 trial. The Phase 3 remains in the early stages of recruitment, with results not expected until the end of CY27 at the very earliest (pending recruitment pace).
Big potential returns
According to the note, Bell Potter has retained its buy rating on the ASX healthcare share with an improved price target of $23.50 (from $22.00).
Based on its current share price of $12.20, this implies potential upside of approximately 93% for investors over the next 12 months. It said:
We maintain our BUY recommendation and increase PT to $23.50.
To put that into context, a $5,000 investment would turn into approximately $9,650 by this time next year if Bell Potter is on the money with its recommendation.
