After a wretched 2016, when many of the top biotech companies were hit hard by campaign rhetoric, the industry has roared back to life this year. While nowhere near the highs posted in 2015, it’s clear that worst is over. The question for many investors is will the president or Congress start beating the high drug prices drum again, and if so, how shrill will they get?
In a new research report, Deutsche Bank notes catalysts for the rest of 2017 and beyond, but is also focused on the macro outlook, which includes repatriation of overseas capital and the potential for mergers and acquisitions. Ten stocks in the report are rated Buy, and here we focus on four that are well-followed on Wall Street.
Rumors have flown for some time that this may be a potential acquisition target. Alexion Pharmaceuticals Inc. (NASDAQ: ALXN) develops and commercializes life-transforming therapeutic products.
It offers Soliris (eculizumab), a monoclonal antibody for the treatment of paroxysmal nocturnal hemoglobinuria (PNH), a genetic blood disorder, and atypical hemolytic uremic syndrome, a genetic disease. It also provides Strensiq (asfotase alfa), a targeted enzyme replacement therapy for patients with hypophosphatasia, and Kanuma (sebelipase alfa) for the treatment of patients with lysosomal acid lipase deficiency.
The company reported second-quarter earnings that rose from last year and topped what analysts had expected. Revenue for the quarter rose about 21% from last year.
The Deutsche Bank price target for the stock is $153, and the Wall Street consensus target is $155.17. Shares traded early Friday at $136.00.
Many top analysts are very bullish on this large cap biotech, even though the stock is still down almost 30% from highs printed in March of 2015. Biogen Inc. (NASDAQ: BIIB) discovers, develops and delivers to patients worldwide innovative therapies for the treatment of neurodegenerative diseases, hematologic conditions and autoimmune disorders. Founded in 1978, Biogen is one of the world’s oldest independent biotech companies, and patients worldwide benefit from its leading multiple sclerosis (MS) and innovative hemophilia therapies.
The company’s core MS drug market is facing challenges going forward, with most diagnosed patients now treated, payers limiting net benefits from price increases and competing entrants expected. With those issues in mind, the analysts are still positive on Tysabri, especially for secondary-progressive MS, with upcoming clinical data a big factor.
Biogen posted solid second-quarter results, boosted by strong sales of its spinal muscular atrophy drug, Spinraza, which is priced at $750,000 for the first year of therapy. Buoyed by the demand for Spinraza, the company raised its full-year earnings and revenue forecasts.
Deutsche Bank has a $315 price target, and the consensus estimate is $322.91. The shares traded Friday morning at $285.70.
This stock is trading at an astounding multiple of less than seven times estimated 2017 estimated profits. Gilead Sciences Inc. (NASDAQ: GILD) discovers, develops and commercializes medicines in areas of unmet medical need in North America, South America, Europe and the Asia-Pacific.
Its products include Stribild, Complera/Eviplera, Atripla, Truvada, Viread, Emtriva, Tybost and Vitekta for the treatment of human immunodeficiency virus (HIV) infection in adults; and Harvoni, Sovaldi, Viread and Hepsera products for the treatment of liver disease.
The stock was hit earlier this year on 2017 guidance, which was much lower than expected on diminishing hepatitis C revenue. However, the analyst is positive on the company’s HIV franchise going forward. It also cited new drug filings this year as potential catalysts.
Shareholders receive a very solid 2.77% dividend. The $79 Deutsche Bank price objective compares with the consensus target price of $76.50. The shares traded recently at $75.00.
This company is partnering with a top big pharmaceutical company and the data have been very solid. Neurocrine Biosciences Inc. (NASDAQ: NBIX) is a biopharma company focused on developing and commercializing therapies for neurological and endocrine disorders.
The company’s lead asset is Ingrezza, approved for the treatment of tardive dyskinesia (TD) and in development for the treatment of Tourette syndrome. Neurocrine is also partnered with AbbVie on elagolix, in development for the treatment of endometriosis and uterine fibroids, and it is developing opicapone as an adjunct therapy for Parkinson’s disease.
Recent results have shown anticipated uptake for the company’s Ingressa and Teva’s Austedo in moderate to severe TD, but preference has swung toward Neurocrine’s offering, partially due to the lower price point. This has many analysts on Wall Street raising their earnings estimates. The Deutsche Bank report noted:
While expectations are relatively low for the first quarter of Ingrezza sales, it will be the key focus for the quarter. Payer reactions as well as anticipated demand (and timing for potential guidance) will also be important. The company reports earnings next week.
Deutsche Bank has set its price target at $65. The posted consensus target is $70.77. Shares traded at $49.00.
Four big opportunities for aggressive investors. There are also substantial risks, should current outcomes and clinical tests not play out favorably. With that in mind, some smaller speculative positions could be the right play for aggressive, risk-tolerant accounts.