Morgan Stanley has upgraded Vir Biotechnology (VIR, Financial) and uplifted its price target for the stock to $20 from "Equal-weight" to "Overweight," sending the stock sharply higher. The stock is currently trading near $12, which suggests it has a 67% upside potential from Morgan's price target of $20.
Analysis Suggests that the stock is slightly overvalued and currently sells at $12.48 per share. The optimism about Vir's T-cell engager (TCE) pipeline, and especially the VIR-5500 program focusing on the treatment of prostate cancer, has enhanced optimism about the company's market standing, and the new target comes as a result. A key reason for the revised valuation was the inclusion of potential revenue from VIR-5500.
In addition, the analysts altered their financial models, raising forecasts for the rate of sales from the new prostate cancer treatment and reducing the projections for operating expenses in keeping with Vir's revised cash guidance. The net impact is positive despite some weakening as Hepatitis B revenues have been pulled out of the forecast.
Despite its rapid cash burn, Vir maintains a solid liquidity position — but it has more cash than debt. The combination of these adjustments together raised the price target to $20, up from $10, based on confidence that the company will develop an attractive pipeline and other positive outcomes. Investors looking for a significant upside can bet on this updated target price.
