Health and Healthcare

Top Stocks That May Move Big at Jefferies Global Healthcare Conference

Once again, the Wall Street conference calendar is heating up. Next week is the widely attended Jefferies Global Healthcare Conference in New York City. Following the success of last year’s conference, with more than 300 presenting companies and 2,000 attendees, the 2013 conference will again feature an extensive range of public and private health care companies across the biopharmaceuticals, life sciences, health care services, health care information technology and medical technology sectors.

As it does prior to most of its conferences, Jefferies asked each of its health care analysts for controversial stocks or themes ahead of the conference. They specifically asked for stocks or themes where the analysts felt there could be information presented that could help settle or resolve controversy or questions. 24/7 Wall Street readers may want to keep the list of stocks handy and monitor them next week as presentations are made.

Here are the stocks by category that the Jefferies analysts submitted.

Biotechnology: Medivation Inc. (NASDAQ: MDVN) has a major prostate pre-chemo cancer drug, Xtandi in phase III trials. Controversy currently centers on the potentially limited size of the pre-chemo market available to Xtandi, which the analysts believe may be unfounded, given their channel checks and the results of proprietary surveys of oncologists/urologists that suggest otherwise. The Jefferies price target for the stock is $64. The Thomson/First Call consensus is higher at $68.

Synta Pharmaceuticals Corp. (NASDAQ: SNTA) is another company with a promising cancer drug. On June 3, at the American Society of Clinical Oncology, Synta will present data from its phase II GALAXY-1 ganestespib lung cancer study. This particular study compares the combination of ganestespib and docetaxel against docetaxel alone in second-line non-small cell lung cancer. The Jefferies price target for the stock is $22, while the consensus estimate is at $18. Both targets represent price movement in excess of 100%.

Dental: Sirona Dental Systems Inc. (NASDAQ: SIRO) develops, manufactures and markets dental equipment for dentists worldwide. Sirona’s efforts to better segment the addressable market for its flagship CEREC platform should serve to stimulate broader adoption of the technology, which to date has only penetrated 13% and 14% of the addressable market in the United States and Germany. The market fears new product launches could weigh on its ability to demonstrate incremental margin expansion. The Jefferies price target is $85. The consensus is $82.

Health Care Information Technology: HMS Holdings Corp. (NASDAQ: HMSY) provides cost containment services to government and private healthcare payers and sponsors. Investor interest in HMS is high ahead of the 2014 Medicaid expansion; however, uncertain timelines have made choosing an entry point difficult. Jefferies expects management to update the companies status with regard to government healthcare programs such as Medicare and Medicaid. Jefferies has a $30 price target on the stock. Consensus is at $30 as well.

Health Care Services: Stericycle Inc. (NASDAQ: SRCL) is the largest handler of medical waste in this country, and it is a big player around the world. With a 95% customer retention rate, it has annuity-like revenue streams to push the growth envelope via internal expansion and acquisition. Margins have come under pressure over the past several years as the company has both accelerated its international expansion and broadened its portfolio to include complementary (i.e., non-medical waste) services. The Jefferies analyst is seeking evidence that margins in Stericycle’s more mature international markets are ramping as expected. Jefferies has a $127 price target on this top name. The consensus estimate is $118.

Life Sciences and Diagnostic Tools: Agilent Technologies Inc.’s (NYSE: A) outsized investments in its bio-analytical businesses (life sciences and chemical analysis) historically have yielded outsized organic returns relative to its peers. Jefferies expects Mike McMullen, Agilent’s President of Chemical Analysis, to provide an update around its strategies to capture incremental market share. Jefferies has a $50 price target. The consensus is at $49. Investors are paid a small 1.10$ dividend.

Medical Supplies and Devices: Accuray Inc. (NASDAQ: ARAY) remains a distant third player in the market for radiation oncology machines. The conference is a chance for the company to again make its case for why it can succeed in improving demand for its technologies. It is also a chance to address the unexpected pickup in orders seen in the March quarter and if this is a sustainable trend. The Jefferies target is $6.50, while the consensus is higher at $7.50.

Pharmaceutical Services: ICON PLC (NASDAQ: ICLR) has seen its backlog grow significantly during the past several years, and it is now converting that backlog of research and outsourced services to revenue at a solid pace. Jefferies analysts expected updates on staffing levels, the outlook for new business wins and the stability of existing relationships. Jefferies has a $38 price objective, and the consensus is at $37.

Specialty Pharmaceuticals: Elan Corp. PLC (NYSE: ELN) became famous for its MS drug Tysabri. Since then, its has restructured the company by unloading its cash-burning early-stage discovery science unit, selling its remaining stake in Alkermes PLC (NASDAQ: ALKS) and restructuring the Tysabri deal with Biogen Idec Inc. (NASDAQ: BIIB). Shareholders will vote June 17 on a hostile tender offer of $12.50 per share. Jefferies believes that management will use the conference to paint a more complete picture of what the new Elan will look like and more thoroughly explain its rationale. The Jefferies price objective is $14, but the consensus target is $12.63.

Global health care is a sector that draws investors from all realms. The Jefferies conference gives companies the chance to tell their stories in an environment that is very conducive to them. Readers may want to do their own due diligence before next week to see if any of the highlighted stocks to buy may fit in their portfolio.

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