If there is any industry that can blow hot and then very cold on Wall Street, it’s biotechnology, and with good reason. Like big pharmaceuticals, politicians love to target biotechs every time the elections roll around, as they are good populous punching bags for drug pricing. The good news for investors this quarter is that the industry should enjoy solid pricing, favorable currency tailwinds as the dollar stays weak, and very reasonable Wall Street expectations.
In a new SunTrust Robinson Humphrey research report, the biotechnology team has a list of six top companies it feels are likely to report revenues that come in above current expectations. We picked four that look like solid buys for aggressive accounts looking to add shares in front of the first-quarter print. All are rated Buy at SunTrust.
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.
Recently, the company announced successful results from a Phase 3 clinical trial assessing ALXN1210 in patients with PNH. The data showed ALXN1210 to be noninferior to Soliris (eculizumab) by virtue of achieving the co-primary endpoints of transfusion avoidance and normalization of lactate dehydrogenase levels, a direct marker of complement-mediated hemolysis in PNH.
The SunTrust team said this in the report:
Expect Soliris sales to come in a bit ahead of consensus on increasing uptake in gMG, Strensiq to likely come in slightly ahead of consensus, while Kanuma’s struggle to continue. Overall, total revenue to beat consensus, while non-GAAP earnings per share should be readily achievable.
The SunTrust price target for the shares is $172. That compares with the Wall Street consensus price objective that is posted at $158.60 and the most recently closing share price of $113.28.
This is one of Wall Street’s favorites and it posted solid earnings last year. BioMarin Pharmaceuticals Inc. (NASDAQ: BMRN) develops and commercializes innovative biopharmaceuticals for serious diseases and medical conditions. Its product portfolio comprises five approved products and multiple clinical and preclinical product candidates.
Over the past decade, BioMarin has become one of the top orphan drug companies, and it looks poised to stay there. Roche recently has been mentioned as a company that could be looking at BioMarin. Roche is heavily focused on oncology drugs and invests heavily in early-stage molecules.
The SunTrust team remains very positive on the shares and noted this in the research:
Price increases in march should help 2018 revenue reach the high end of 2018 guidance. We expect the approval of pegvaliase in the U.S. The Prescription Drug User Fee Act date is May 28.
SunTrust has a $130 price objective for the stock. The posted consensus target price was last seen at $114.30. The stock closed trading on Tuesday at $84.45 a share.
This stock gapped down recently and is offering a solid entry point. Exelixis Inc. (NASDAQ: EXEL) is focused on discovery, development and commercialization of new medicines to manage care and outcomes for people with cancer. Its cabozantinib product is an inhibitor of multiple tyrosine kinases, including MET, AXL and VEGF receptors.
The company’s Cabometyx tablets are approved for previously treated advanced kidney cancer, and Cometriq capsules are approved for progressive, metastatic medullary thyroid cancer. The third product, Cotellic, is a formulation of cobimetinib, a selective inhibitor of MEK is approved as part of a combination regimen to treat advanced melanoma. Both cabozantinib and cobimetinib have shown potential in a range of forms of cancer and are the subjects of broad clinical development programs.
The SunTrust team thinks the company can beat earnings estimates for some of its drugs for the quarter. The analysts noted this in the report:
We expect sales growth to resume and Cabometyx revenue to beat consensus estimates based on prescription and pricing data. The focus remains Immuno oncology moving to first line from second line, making more room for Cabometyx to grow in second line kidney cancer going forward.
The $40 SunTrust price target compares with the $35.29 consensus target. The stock ended trading at $21.67 per share on Tuesday.
This is a favorite mid-cap biotech pick at RBC for 2018. Sarepta Therapeutics Inc. (NASDAQ: SRPT) focuses on the discovery and development of RNA-based therapeutics for the treatment of rare, infectious and other diseases. Its lead product candidate is eteplirsen, an antisense phosphorodiamidate morpholino oligomer therapeutic that is used for the treatment of individuals with Duchenne muscular dystrophy, a genetic muscle-wasting disease caused by the absence of dystrophin.
In the mid-cap commercial space, Sarepta posted a robust start to the U.S. Exondys 51 launch last year, as well as having the potential for first data from the broader pipeline, including gene therapy and peptide phosphorodiamidate morpholino oligomers. The SunTrust analysts said this regarding earnings potential:
We expect the strong U.S. launch of Exondys 51 to continue in the first quarter. The Company intends to complete a rolling NDA submission for golodirsen by year-end 2018.
SunTrust has set its price target at $95. The consensus price objective is $88.47, and the stock closed most recently at $79.87 a share.
These four top picks for 2018 all have the potential for big upside moves if they do indeed exceed first-quarter expectations. It should be reminded that biotech stocks are extremely volatile, and only suitable for hyper-aggressive accounts with big risk tolerance.
Sponsored: Tips for Investing
A financial advisor can help you understand the advantages and disadvantages of investment properties. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Investing in real estate can diversify your portfolio. But expanding your horizons may add additional costs. If you’re an investor looking to minimize expenses, consider checking out online brokerages. They often offer low investment fees, helping you maximize your profit.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.