Nine Big Expected Biotech Winners for 2013 (ARIA, CBST, INCY, JAZZ, MDVN, ONXX, THRX, VPHM, VVUS)

Ariad Pharmaceuticals Inc. (NASDAQ: ARIA)
> Share price: $20.18
> Market value: $3.36 billion

Ariad’s consensus price target is $29.61 and its 52-week trading range is $11.27 to $25.40. If the consensus target is right, this implies more than 46% upside over the next year. While our aim was to avoid implosions, Ariad did take a big hit. And note that the upside price target is still much higher than the actual share price now, but it may be coming down soon due to recent negative news. Having been public since the mid-1990s, Ariad shares recently traded at all time highs. This oncology-focused player just had its expectations lowered by Jefferies due to drug safety issues, and the target is now $23 there. Ariad intends to market ponatinib beyond Europe and the United States, and earlier in 2012 it began phase I/II clinical trials with ponatinib in Japan. The FDA’s response should be out by the end of March in 2013, so there is a big make or break coming ahead.

Cubist Pharmaceuticals Inc. (NASDAQ: CBST)
> Share price: $43.37
> Market value $2.79 billion

Cubist’s consensus price target is $52.09 and its 52-week trading range is $36.73 to $49.86. If the consensus target is right, this implies 20% upside over the next year. Cubist has decided to live up to our prior expectations now that shares have improved. The only difference is that we expected a larger biotech or pharma player to acquire it. Cubicin is now well-received and its fight against hospital-acquired infections is now a success, along with other products. This company has been public since the late-1990s, and even though shares recently hit a decade-high the stock would have to go above $60 before the all-time high has been seen. Earnings per share are expected to mildly contract in 2013, but the revenue growth expectations of almost 23% in 2012 are expected to rise another 11% to just over $1 billion in 2013. Cubist trades at about 22-times expected 2013 earnings.

Incyte Corp. (NASDAQ: INCY)
> Share price: $16.24
> Market value: $2.13 billion

Incyte’s consensus price target is $25.00 and its 52-week trading range is $14.06 to $26.30. If the consensus target is right, this implies a whopping 53% upside over the next year. Incyte is a riskier bet for upside in 2012 because its shares were slammed down to less than $18 from about $25 over the summer. While the stock has slid lower, the good news is that the chart has shown twice to use just under $16 as support since that drop. The company’s Jakafi for myelofibrosis already has been approved, but the fear now is that Gilead will be a strong competitor in cancers of the blood after an acquisition. Another concern is that Incyte has been public since before 1995 and its peak was way back in the year 2000, when shares were up above $100 for a very brief period. The expected sales growth for 2012 of about 185% to almost $270 million is expected to slow to 33% sales growth to almost $360 million in 2013. The expected loss of $0.32 per share for 2013 is versus an expected loss of $0.54 per share in 2012. This remains a 2014 to 2017 story, as Incyte has multiple products in its pipeline for cancer and inflammation in Phase I to Phase III studies.

Jazz Pharmaceuticals PLC (NASDAQ: JAZZ)
> Share price: $52.55
> Market value $3.04 billion

Jazz’s consensus price target is $69.18 and its 52-week trading range is $36.29 to $60.00. If the consensus target is right, this implies almost 32% upside over the next year. Jazz already was having a decent 2012, but the real gains came from a major jump from $38 to $48 in early January before basing out, followed by an even larger gain from $44 to $58 in September. The stock now has seemed to use $50 as a leveling off price on the chart. Here is what really stands out in Jazz: Its shares were around $16 after its 2007 IPO, but then slid down to under $1.00 during the height of the early 2009 panic selling. If any investor managed to catch the bottom and is still riding this horse, Jazz’s 60-bagger bounce has outperformed Apple Inc. (NASDAQ: AAPL) by about tenfold. The expected sales gains of more than 100% in 2012 are expected to show a 37% gain to $809 million in 2013. With earnings expected to grow from about $4.73 per share in 2012 to $5.67 in 2013, Jazz shares trade at less than 10-times the expected 2013 earnings. Maybe that massive run up has spooked some new investors, but on paper this one sounds cheap. Jazz has approved products for narcolepsy, psychiatry, pain and oncology. It also has four various pipeline candidates.

Medivation Inc. (NASDAQ: MDVN)
> Share price: $55.35
> Market value: $4.11 billion

Medivation’s consensus price target is $68.08 and its 52-week trading range is $22.46 to $58.83. If the consensus target is right, this implies 23% upside over the next year. After an expected gain of close to 200% to about $174 million in 2012, the sales expectation is for “only” about 17% growth to almost $205 million in 2013. Unfortunately, the loss is expected to widen out to $0.89 per share in 2013, versus a $0.65 per share loss expected in 2012. Since shares have more than doubled in 2012 to all-time high,s and with this having been public since the late 1990s, some investors may feel as though the big gains have been seen here. The big development was XTANDI getting approved in 2012 for the treatment of metastatic castration-resistant prostate cancer for those who have been previously treated with Docetaxel. Medivation’s Enzalutamide, in collaboration with Astellas, is in various phases of study for prostate cancer and breast cancer.

Onyx Pharmaceuticals Inc. (NASDAQ: ONXX)
> Share price: $80.83
> Market value: $5.43 billion

Onyx’s consensus price target is $100.94 and its 52-week trading range is $35.73 to $93.18. If the consensus target is right, this implies about 25% upside over the next year. Shares recently hit an all-time high, and this one has been public since 1996. Onyx shares have risen handily in 2012 versus prior years, but the expectation is that 2012 sales will be down 23% to $344.5 million. The trick is that sales are expected to grow by more than 50% in 2013 to almost $540 million. Unfortunately, the positive earnings of 2011 are expected to be followed by losses in 2012 and in 2013. Even if the consensus price target of almost $101 seems high, UBS recently started coverage with a Buy rating and a $97 price target. Onyx’s Nexavar and Kyprolis are for cancer treatments already, but the company is looking for expanded uses. Onyx also has a clinical development pact with Pfizer Co. (NYSE: PFE) in Phase II studies.

Theravance Inc. (NASDAQ: THRX)
> Share price: $22.65
> Market value: $2.22 billion

Theravance’s consensus price target is $30.67 and its 52-week trading range is $12.91 to $31.87. If the consensus target is right, this implies 35% upside over the next year. Theravance remains unknown to many investors, and its revenues are spotty, with expectations of $133.7 million in 2012 and dropping to $40.7 million in 2013. The company’s VIBATIV is a competing treatment for Cubist’s Cubicin against MRSA. The product pipeline is the real story here, with targets against respiratory issues, bacterial infections, central nervous system and pain management, and gastrointestinal motility dysfunction. This stock has pulled back but has now settled in the low-$20s, but its true peak was around $35 back in 2007. With analysts still expecting losses for the foreseeable future, Theravance remains a pipeline story rather than a product story.

ViroPharma Inc. (NASDAQ: VPHM)
> Share price: $23.89
> Market value: $1.57 billion

ViroPharma’s consensus price target is $34.98 and its 52-week trading range is $19.02 to $33.17. If the consensus target is right, this implies more than 45% upside over the next year. Cinryze for the treatment of Hereditary Angioedema is the focus right now, after getting approved in Europe and after having been approved by the U.S. FDA. It also has Vancocin for the treatment of clostridium difficile and Buccolam to treat seizures approved in the U.S. The next big hope here is Plenadren for te treatment of adrenal insufficiency in adults, which could be a huge win if it lives up to expectations. ViroPharma shares have been much higher lately than they are now, but this is up from the depths of panic from 2003 to 2005 when it had a questionable future. Sales are expected to be down about 20% in 2012, but growing by almost 10% in 2013 to $467.5 million. Unfortunately this is a 2014 to 2017 recovery, because ViroPharma’s valuation is now about 65-times its expected 2013 earnings.

VIVUS Inc. (NASDAQ: VVUS)
> Share price: $13.14
> Market value: $1.32 billion

VIVUS’s consensus price target is $23.89 and its 52-week trading range is $8.60 to $31.21. If the consensus target is right this implies more than 80% upside over the next year. While shares of VIVUS have come way off, more positive obesity sales data has added some support in the stock in December. VIVUS was identified as one of the obesity winners as well in our own internal outlook piece. This biotech has been public since before 1995, and its shares have enjoyed ups and downs the whole ride. In fact, its highs were back in the 1990s rather than of late. The consensus is still for a loss of $0.85 per share and only $138.4 million in revenue in 2013, but the obvious hope is that Qnexa has the potential to be a blockbuster drug.

Here are the other sector outlooks for 2013 from 24/7 Wall St.: