So we looked at $1 billion in market capitalization as a floor. A few companies were close to this, but we still ended up with nine great expectations. This $1 billion floor eliminates many of the great upside companies that could rise from $300 million up into the multibillion category, but it also aims to protect investors from the extremely speculative biotechs that also could blow up. Our secondary criteria was that the consensus price target objective from Thomson Reuters had to be 20% above the current share price.
One last thing to note was that we eliminated any of the recent train wrecks, where a stock was in dire straits and where the analyst target was only still so high because of a price implosion. We also added color on each company, with valuations and the company products and pipelines, so that investors could get a better feel for what each company does and what the risks and upside are in each. We focused as well on companies that already have revenue or are just about to enter the revenue phase.
These stocks have been put in alphabetical order: Ariad Pharmaceuticals Inc. (NASDAQ: ARIA), Cubist Pharmaceuticals Inc. (NASDAQ: CBST), Incyte Corp. (NASDAQ: INCY), Jazz Pharmaceuticals PLC (NASDAQ: JAZZ), Medivation Inc. (NASDAQ: MDVN), Onyx Pharmaceuticals Inc. (NASDAQ: ONXX), Theravance Inc. (NASDAQ: THRX), ViroPharma Inc. (NASDAQ: VPHM) and VIVUS Inc. (NASDAQ: VVUS). All estimates have come from Thomson Reuters, but remember that these estimates can and likely will change through time.
Another driving force behind emerging pharma and biotech stocks is M&A activity. Big pharma and large biotech companies have spent billions and billions of dollars to acquire new drug pipelines and R&D efforts. Some of these companies may easily fit the bill as potential M&A candidates in 2013 or beyond. That being said, 24/7 Wall St. has by and large not included any current or past buyout rumors that have surrounded some of these companies. We are looking to evaluate each of these companies based on the underlying fundamentals and expectations based on the facts and base-case outlooks rather than the hope.
Those big gains from Amgen Inc. (NASDAQ: AMGN), Biogen Idec Inc. (NASDAQ: BIIB) and Gilead Sciences Inc. (NASDAQ: GILD) created a whopping $60 billion in combined shareholder gains in 2012. Unfortunately, analysts are not looking for a repeat from these giants in 2013. It is interesting that the wealth created from these three giants alone is worth more than the entire current market values of all nine of our companies, which are expected to be the best biotech performers of 2012.
Here are the nine established biotechs expected to have the most upside in 2013.