Stifel Says Strong Earnings Will Reignite Biotech Rally

April 4, 2014 by Jon C. Ogg

When the biotech sell-off started in late February, the stocks had been market leaders for almost four years. The staggering and intense selling knocked a quick 17% off the index and immediately bearish voices from Wall Street were calling it a bubble. In a new research piece, the analysts at Stifel maintain that strong earnings will restart the rally and that we are nowhere near the biotech bubble levels that exploded in 2000.

Here are the top biotech stocks to buy at Stifel where they expect very strong earnings reports.

Alexion Pharmaceuticals Inc. (NASDAQ: ALXN) recently raised its guidance, and Wall Street took it as a very solid sign. The Stifel team also thinks the company will benefit from a currency-aided tailwind as Europe will account for almost half of the company’s total sales in the quarter. Stifel has a $219 price target for the stock. The Thomson/First Call number is at $191.60. Alexion closed Thursday at $151.46 a share.

Biogen Idec Inc. (NASDAQ: BIIB) is a top stock to buy at Stifel, and the analysts are way above consensus estimates. They, like many on Wall Street, predict that Biogen’s Tysabri earnings will have a meaningful jump this quarter. They also expect the company to reiterate guidance for anti-LINGO data in acute optic neuritis in 2H14, which provides the highest level of potential upside to Biogen’s share price if the results are positive. The Stifel target price for the biotech giant is $376 and the consensus is at $346.84. Biogen closed Thursday at $301.86.

Celgene Corp. (NASDAQ: CELG) will soon launch Otezia, which was recently approved for treating psoriatic arthritis. The big issue for the company is the current review of the patents for Revlimid, which range from 2016 to 2027. The outcome will determine the exact length and depth of Celgene’s intellectual property on the drug. Stifel has a $185 price target, and the consensus target is $193.25. Celgene closed trading on Thursday at $143.60.

Gilead Sciences Inc. (NASDAQ: GILD) is another name for which Stifel is way above the consensus number for the quarter. The firm also thinks the recent concerns that were voiced by members of Congress over the price of Sovaldi will not remain an issue. The current launch numbers for the drug are tracking as perhaps the highest ever recorded. Stifel has placed a $92 price target on the stock, and the consensus figure is $98.42. Gilead closed Thursday at $74.00.

Intermune Inc. (NASDAQ: ITMN) is expected to ramp up international sales of Esbriet. The drug was developed for the treatment of idiopathic pulmonary fibrosis. The key for the company will be FDA approval for sales in the United States. A randomized Phase 3 trial (the ASCEND study) is currently underway in the U.S., and recent trial data was very positive. The Stifel price target is $43, and the consensus target is $39.21. Intermune closed Thursday at $32.38.

The Stifel team is probably on the right track when they talk about positive earnings profiles. Many of the firms we cover are bullish on biotech stocks, and we have shown how many top biotechs are now valued as if they were old world drug stocks. While they are certainly not for ultra conservative accounts, a solid position in biotech stocks can give a big lift to a portfolio. Also, in a rival call we saw that Jefferies identified the top biotechs for their breakthrough drug innovations.