Fundie names underappreciated ASX biotech share with 'significant upside'

Why is this ASX biotech share a potential winner?

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Key points

  •  Karst Peak Capital has recommended an ASX biotech share with "significant upside" 
  • The share has surged 188% in the past year, and 78% in the past six months.
  • FDA approval for this company's lead drug candidate could be on the way 

The S&P/ASX 200 Pharmaceuticals & Biotechnology index (AXPBKD) is down 2.7% in the past year, but this one ASX biotech share could be a winner.

The share has gained 188% in the past year, and 78% in the past six months.

So which ASX biotech share has one expert recommended?

Which ASX biotech share?

ASX biotech share Neuren Pharmaceuticals Ltd (ASX: NEU) could have "significant upside" from its current levels, one analyst believes. In today's trade, the shares are swapping hands at $3.81, a 2.06% fall.

Karst Peak Capital healthcare research head Hashan De Silva said Neuren could be worth $2.5 billion, more than five times its current market capitalisation. Writing for Livewire, he said:

Even though Neuren's share price doubled in Dec 21 following positive Phase 3 data, we believe there is still significant upside from current levels; in fact, in our view the risk/reward of the stock is more attractive today than at any point in the past few years and we added to our position following the Phase 3 readout.

The Neuren share price has surged around 129% since market close on 6 December. On 7 December, the company revealed promising results from a phase three trial into the use of its drug candidate Trofinetide in Rett Syndrome. Project partner Acadia Pharmaceuticals (NASDAQ: ACAD) plans to submit a new drug application to the US Food and Drug Administration (FDA) mid-year.

De Silva said he believes there is likely no competition for trofinetide for many years and he believes FDA approval is "very likely". He said:

Given the strong results in the Phase 2 and Phase 3 trials, the clean safety profile, strong patient advocacy and the lack of any approved drugs for Rett Syndrome, we believe it is highly likely the FDA will approve trofinetide.

We expect approval by late 2022/early 2023 given Acadia's plan to submit the drug for approval around mid-year.

On Friday, the company also informed the market it has received FDA approval for a phase two trial of the use of NNZ-2591 in Angelman Syndrome.

Neuren share price snap shot

The Neuren Pharmaceuticals share price has surged 27% in the past month although is down 1.5% in the past week.

In comparison, the benchmark S&P/ASX 200 Index (ASX: XJO) has climbed 2% in the past month and is down 3% in the last week.

Neuren has a market capitalisation of about $478 million based on its current share price.

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 Bruce Jackson.

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