The recent market sell-off spared no sector, and the top biotechnology stocks were treated with their own trip to the woodshed. Rising trends in prescriptions and higher, yet beatable increases in earnings have set the table for what the UBS biotech analysts feels could be a very solid third-quarter earnings season for the top companies in their coverage universe.
While dollar strength could pose a top-line headwind on earnings for some of the sector leaders, new product introductions, combined with continued strong sales of market leading drugs can propel outstanding revenues. Add in some clinical and data driven catalysts, and shareholders of the top stocks may be very pleased.
We screened the top biotech stocks at UBS for those expected to report strong per-share earnings for the quarter.
Alexion Pharmaceuticals Inc. (NASDAQ: ALXN) is a top stock to buy at many Wall Street firms, including UBS, and it has been considered by some firms as a potential acquisition target. Some analysts see likely strong accretive near-term to an acquirer, given the very impressive $1.5 billion in company revenues that are big enough to be significant to a bigger company. The FDA has granted an orphan drug designation to Soliris, its only marketed product, for the treatment of patients with myasthenia gravis, a rare neurological disorder, which reportedly affects an estimated 13,600 people in the United States.
The UBS price target for the stock is $202. The Thomson/First Call consensus estimate is posted at $198.57. Alexion closed Friday at $167.80 a share.
Amgen Inc. (NASDAQ: AMGN) is one the top blue chip stocks in the biotech world, and it is a top company for investors to own in health care. It is one of the stocks that the UBS team thinks can beat current earnings estimates. The company announced this summer that its FOCUS trial of Kyprolis in patients with relapsed and advanced refractory multiple myeloma, a cancer of plasma cells, failed, which was a near-term catalyst many had been watching for. Despite the failure, the stock has bounced back, and the large pipeline the company has, combined with its acquisition of Onyx pharmaceutical last year, bodes well for the future. UBS feels Amgen will benefit with much increased revenue from its new cholesterol drug Evolocumab.
Amgen investors are paid a 1.8% dividend. The UBS price target for the stock is $155. The consensus price target is lower at $144.90. Amgen closed Friday at $137.39.
Biogen Idec Inc. (NASDAQ: BIIB) is another top stock to buy at UBS, which also expects it to beat current earnings estimates. Many on Wall Street are predicting that its Tysabri earnings will have a meaningful jump this year and beyond. Wall Street analysts applauded the release of data on a monoclonal antibody called BIIB033, which is safe and tolerable in people, according to the combined results of two Phase 1 clinical trials that tested high doses in healthy people and those with multiple sclerosis. The UBS report also points to strong sales trends for the company’s Tecfidera drug, and it is $17 million higher than other Wall Street estimates for the quarter.
Biogen has a distinct advantage over many biotechs as the company has no near-term patent expirations to deal with. The UBS price target is $354. The consensus target it set at $376.76. The stock closed Friday at $315.14.
Celgene Corp. (NASDAQ: CELG) presented results this summer from an analysis that showed encouraging news for blockbuster drug Revlimid as a treatment for multiple myeloma. A combination of Revlimid and low-dose dexamethasone significantly improved overall survival and progression-free survival rates, leading some experts to conclude that the treatment probably now will become the new standard of care for the disease. Many on Wall Street see the company working to diversify away from the flagship product through the emerging inflammation and immunology franchise, and a rich pipeline of alliances.
The UBS team is also anticipating solid data from the company’s GED-301, and sees the release as a possible big catalyst upcoming. They have a $112 price target. The consensus target is $103.84. Celgene closed on Friday at $90.93.
Gilead Sciences Inc. (NASDAQ: GILD) is expected to once again post huge sales for its leading drug Sovaldi in the the third quarter. The UBS team is increasing their sales estimates for the powerhouse drug by $50 million to a massive $3 billion for the quarter. Even though that is a huge increase, the UBS analysts feel that current prescription trends could bring in an even higher beat by the biotech giant. UBS and other Wall Street analysts are also looking for positive data on the company’s Phase 3 HIV “TAF” (son-of-Viread) pivotal data, which could come as early as this month. Viread is Gilead’s hepatitis B and HIV drug, which will go off patent in 2018.
Trading at just 8.8 times 2016 earnings versus the company’s peers, which trade at 16.2 times, the stock is flat out cheap. In addition, consensus earnings numbers for the company show a stunning 55% compound annual growth rate going forward. UBS analysts think the company can power past current earnings estimates, and their price target is $125, while the consensus target is $117.67. Gilead closed Friday at $103.73.
Regeneron Pharmaceuticals, Inc. (NASDAQ: REGN) has been a performance monster over the past two years, and most Wall Street firms, including UBS, expect it to stay one. With treatments for everything from macular degeneration to colorectal cancer, the company continues to exploit an extraordinary pipeline. The UBS analysts are very positive on the company’s Alirocumab, which is another new cholesterol drug with big expected upside. In fact, doctors think the yearly cost for the new cholesterol drugs could be $8,000 to $10,000 per year per patient. This could add substantial earnings to current estimates.
The UBS price target is posted at $360, and the consensus is slightly higher at $374. The stock closed Friday at $343.51 a share.
The UBS price targets for these top biotech stocks are more conservative than many on Wall Street. Even at their lower numbers, any of these leading companies are tremendous additions to aggressive growth portfolios.