What happened

Shares of Wave Life Sciences (NASDAQ:WVE) vaulted 5.3% higher as of the market close on Tuesday, after rising as much as 12.2% earlier in the day. The gain resulted from Truist Securities analyst Joon Lee's upgrade of the stock. Lee raised his price target on Wave to $27 from $20.

So what

Analysts' upgrades really don't mean all that much in the big scheme of things. However, it's smart for investors to understand the reasons behind analysts' optimism (or pessimism) about a given stock.

Scientist holding two test tubes

Image source: Getty Images.

In this case, Joon Lee thinks that Wave's presentation of new preclinical data for its adenosine deaminases acting on RNA (ADAR) editing technology underscores the potential for the biotech stock. ADARs are enzymes that bind to messenger RNA (mRNA). Editing ADARs is a promising way of modifying RNA to ultimately restore or alter protein function to treat multiple diseases. 

Wave's pipeline includes two programs in phase 1/2 testing targeting Huntington's disease, a rare genetic disease in which the brain's nerve cells break down over time. The company also has several preclinical programs, including its ADAR editing therapies.  

Now what

The main things to watch with Wave in the coming months are the biotech's planned submissions in the fourth quarter of clinical trial applications for programs targeting neurological disorders amyotrophic lateral sclerosis and frontotemporal dementia, and Huntington's disease. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.