Since March 4, the biotech index is off a massive 19%. There has been plenty of Wall Street speculation on why the sell-off was so violent, but at the end of the day it boils down to the fact that sellers were out in force, and short sellers were probably right behind them pushing shares even lower. In a new research report, the J.P. Morgan health care team highlights their top names to buy after the sell-off that may provide investors some incredible outsized gains over the rest of the year.
We screened their top picks for those with the most upside to their J.P. Morgan price target. All stocks are rated Overweight.
Bristol-Myers Squibb Co. (NYSE: BMY) is the top pick in large cap pharmaceuticals. The analysts at J.P. Morgan see several near-term catalysts that could push shares higher. Bristol-Myers is looking to get a once-daily, single tablet fixed-dose combination approved in conjunction with other antiretroviral agents for the treatment of HIV-1 infection. Approval of the cocktail treatment would simplify matters for HIV-1 patients by eliminating the need to take a boosting agent in a separate tablet. Investors are paid a solid 2.9% dividend. The J.P. Morgan price target for the stock is $60. The Thomson/First Call consensus estimate is $55.12. The stock closed Thursday at $49.46.
Gilead Sciences Inc. (NASDAQ: GILD) is a top biotech that has been crushed in the sell-off and will report earnings this week. Down an incredible 22% at its low, the stock trades at a very reasonable 15.2 times forward earnings, and it has rallied back some. Many firms on Wall Street think the recent concerns voiced by members of Congress over the price of Sovaldi, the company’s top hepatitis C drug, will not remain an issue. The current launch numbers for the drug are tracking as perhaps the highest ever recorded. The J.P. Morgan price target is $100, and the consensus figure is $97.67. Gilead closed Thursday at $70.
Incyte Corp. (NASDAQ: INCY) is another biotech name that the J.P. Morgan analysts are very positive on. They think the stock clearly has the most significant amount of near-term catalysts that could stem the bleeding and potentially propel shares materially higher. The company should be giving pipeline updates at the upcoming American Society of Clinical Oncology (ASCO) meeting. If it can deliver promising data sets at ASCO for its key pipeline drugs and programs, J.P. Morgan believes it will be increasingly viewed as a core holding among mid-cap biotechs. The firm’s price target is $80, and the consensus is at $72.08. The stock closed Thursday at $44.54. A move to the J.P. Morgan target would be a huge 80% gain
Illumina Inc. (NASDAQ: ILMN) has also been mauled, and the stock is down 25% from its year-to-date peak. The company was the dominant early leader in a growing genetic sequencing market that some analysts predict could reach $20 billion annually in the near future. The company has a dominant 70% market share in the industry and its development of groundbreaking technologies, such as the $1,000 human genome, have been game changing. Illumina’s dominance in the early days of the gene sequencing market have the company poised to ride its innovation to years of success. The J.P. Morgan price target is $190, and the consensus target is $166.40. Illumina closed Thursday at $135.60.
Mylan Inc. (NASDAQ: MYL) is one of the top generic drug companies and has been hammered. The stock is down 17.7% and trades at a very low 13.5 times forward earnings estimates. The company confirmed that a federal district court has granted its request to enforce a settlement agreement between Endo Pharmaceuticals and Mylan settling patent litigation in connection with Mylan’s filing of an Abbreviated New Drug Application (ANDA) with the U.S. Food and Drug Administration (FDA) for Frovatriptan Succinate tablets, 2.5 mg. This product is the generic version of Frova, which is used to treat acute migraine headaches in adults and had almost $70 million in sales last year. J.P. Morgan has a $65 target for the stock, and the consensus target is $61. Mylan closed Thursday at $46.92.
NPS Pharmaceuticals Inc. (NASDAQ: NPSP) CEO Francois Nader told Wall Street analysts to expect an FDA advisory panel to be held for its leading drug candidate Natpara before the October Prescription Drug User Fee Act (PDUFA) date. If the panel is positive and the drug is approved, NPS will be ready to launch the drug before the end of the year. NPS is also gearing up to start a phase 2a study of NPSP790 in autosomal dominant hypocalcemia later this year. Some on Wall Street think this is what an acquiring company may be looking for. The J.P. Morgan price target for the stock is $47, and the consensus is at $43.50. NPS closed Thursday at $24.55. A move to the target would be a gigantic 91% gain.
The J.P. Morgan team has a well-rounded selection of stocks from high-beta biotechs to lower beta big pharmaceuticals. Investors with some cash to put to work may want to consider some of these top names for their portfolios now. Especially, when some of the them have been absolutely hammered on a price basis and are offering tempting entry points.