Over the past five, 10 and 20 years, the life sciences and bioproduction segments have tended to outperform the S&P 500 more often than not. Considering the exposure to biopharma and academic end-markets that provide counter-cyclical growth to more volatile industrial end-markets, one key analyst believes that the life sciences segment is well-positioned to continue outperforming the S&P 500. As a result, the firm listed a few of its top picks within the sector.
In its Spring LabBook report, Janney Capital released data supporting its estimate that industry growth will accelerate from 3.2% last year to 4.7% this year. The firm is particularly bullish on the outlook for Asian growth, continued signs of a recovery in industrial end-markets and bioproduction. While bioproduction represents the fastest growing group in life sciences, Janney views industrial/applied markets as the key incremental catalyst in 2017.
Since 2004, there have been 72 biologics approved by the FDA, of which 49 have been monoclonal antibodies (mAbs). In 2016 an additional eight biologics were approved by the FDA. Janney views the growing number of approved biologics as an indicator the industry is becoming less reliant on a handful of “blockbuster” drugs.
Janney listed some of its favorite picks in the space. All have a Buy rating:
- Agilent Technologies Inc. (NYSE: A) shares close most recently at $53.03. The stock trades in a 52-week range of $40.26 to $54.82, with a consensus analyst price target of $56.79.
- PerkinElmer Inc. (NYSE: PKI) closed at $57.60. The stock has a consensus price target of $56.93 and a 52-week trading range of $45.35 to $58.40.
- West Pharmaceutical Services Inc. (NYSE: WST) last closed at $79.85, with a consensus price target of $80.00 and a 52-week range of $69.60 to $88.30.
- Brooks Automation Inc. (NASDAQ: BRKS) most recently closed at $21.81, within its 52-week range of $8.99 to $22.81. The consensus price target is $21.83.
- Mesa Laboratories Inc. (NASDAQ: MLAB) closed Tuesday at $136.48, in a 52-week range of $94.40 to $137.20. The consensus analyst target is $138.50.
The firm commented on academia end-markets:
The accelerating growth in Academia we anticipated from the record NIH budget increase in FY16 seems like a distant memory after President Trump released is “Blueprint to Make America Great Again.” Within his budget is a proposal to reduce NIH funding by $5.8 billion, or 18%. While GOP leadership has emphasized such a draconian cut will not pass Congress, it still calls into question what can re-accelerate growth within Academia. Congress needs to pass a budget resolution by the end of April, which should shed some light on the LT outlook for the segment. In our coverage universe, Illumina, Inc. (NASDAQ: ILMN), Bruker Corporation (NASDAQ: BRKR), Bio-Techne Corp. (NASDAQ: TECH), NanoString Technologies, Inc. (NASDAQ: NSTG), and Harvard Bioscience, Inc. (NASDAQ: HBIO) have the highest exposure to Academic end-markets.