The biotech sector has seen its share of ups and downs in 2011 and prior years. It is almost always the case that some of the top performing stocks each year come from this sector due to the possibility of a company rising from no sales at all to having the next blockbuster drug. 24/7 Wall St. has evaluated the biotech sector for its prospects in 2012 and identified those companies which are expected to outperform the broad market.
Our screen process did not limit the scope to positive earnings, but we did use a minimum market valuation of $1 billion to avoid the smaller and even more speculative names in an already speculative sector. The companies are all expected to rise 20% more and include the following stocks tied to biotech and the biohealth sectors: ARIAD Pharmaceuticals, Inc. (NASDAQ: ARIA); Dendreon Corporation (NASDAQ: DNDN); Gilead Sciences, Inc. (NASDAQ: GILD); Human Genome Sciences, Inc. (NASDAQ: HGSI); Illumina, Inc. (NASDAQ: ILMN); Incyte Corporation (NASDAQ: INCY); Jazz Pharmaceuticals, Inc. (NASDAQ: JAZZ); Life Technologies Corporation (NASDAQ: LIFE); and Theravance, Inc. (NASDAQ: THRX).
Unfortunately, some of these are biotech implosions where companies have run into problems. Others are pre-revenue and could be tomorrow’s drug giants in cancer and other indicated treatments. Some may even be acquired. We have included the current share price and recent price history, as well as based the implied upside upon the consensus price target objective from Thomson Reuters. Recent fundamental data and color has been added on each if applicable.
There are also the ETF products via the iShares Nasdaq Biotechnology (NASDAQ: IBB) and the SPDR S&P Biotech (NYSE: XBI). The iShares variation trades at $104.30 and its 52-week range is $83.96 to $110.02. Gilead (and Pharmasset) would be the largest implied holding of the iShares ETF with almost 16% weighting combined. The SPDR variation trades at $66.48 and its 52-week range is $47.01 to $75.17. The SPDR also only contains ARIAD (and Pharmasset) of the biotechs with the most implied upside below.
ARIAD Pharmaceuticals, Inc. (NASDAQ: ARIA) currently trades around $12.50, has a market cap of about $1.65 billion, and the Thomson Reuters consensus price target of $15.91 leaves an implied upside of about 27%. Its 52-week trading range is $5.04 to $13.50 and 2011 has been a year where the company’s share price has come close to challenging the prior highs from 1999 to 2000. It is still pre-revenue for the most part and losses are expected to continue at least through 2012. ARIAD is focused around oncology and its shares are up from a $10.42 per share offering of almost 25 million shares that raised nearly $250 million for the company. This was one of the good secondary offerings that allows the company to raise development and commercialization funds without becoming dependent solely upon a single partner.
Dendreon Corporation (NASDAQ: DNDN) is another implosion story due to lower adoption rates of PROVENGE for prostate cancer, although some are hoping and expecting that the new reimbursement rates (and physician clarity) may help the company regain some of its lost footing. At $7.58, the market cap is barely $1.1 billion and the $11.05 Thomson Reuters price target leaves an implied upside of over 45%. To show just how bad this one has gone, the 52-week trading range is $6.46 to $43.96.
Gilead Sciences, Inc. (NASDAQ: GILD) recently traded at $39.88 and it is one of the biotech giants with a market cap of about $30 billion. THe 52-week trading range is $34.45 to $43.49 and the Thomson Reuters consensus price target of $48.86 leaves an implied upside of 22.5%. The last time Gilead was above $50.00 was in early 2009. Gilead is somewhat surprising to see on the list considering its controversial $11 billion acquisition of Pharmasset when that target acquisition is not expected to generate sales for at least another year. The company has new HIV medication that is helping to boost the value but the company is diversifying to include more target markets.