Considering the health care sector has been on fire for the first quarter of 2015, analysts are putting more value in biotechs and big pharmaceuticals. Credit Suisse is no different. The brokerage firm released a report that detailed its top picks for pharmaceutical stocks for the rest of 2015.
Credit Suisse revised its estimates going forward after the first quarter. Bristol-Myers Squibb Co. (NYSE: BMY) and Pfizer Inc. (NYSE: PFE) remain the firm’s top picks. The brokerage firm has published updated models for each of its large U.S. pharmaceutical companies following first-quarter earnings, as well as other recent news flow.
While continuing to prefer Bristol-Myers and Pfizer as the top picks, Credit Suisse also has AbbVie Inc. (NYSE: ABBV) rated as Outperform. However, the firm’s Vamil Divan remained Neutral on Merck & Co. Inc. (NYSE: MRK), Johnson & Johnson (NYSE: JNJ) and Eli Lilly & Co. (NYSE: LLY).
Credit Suisse raised its price targets for Bristol-Myers (to $75 from $70), Eli Lilly (to $72 from $71), Merck (to $62 from $60) and Pfizer (to $37 from $36), and reduced the price target for Johnson & Johnson (to $108 from $110), while the AbbVie price target of $69 is unchanged.
Bristol-Myers recently announced plans to invest in Dutch biotech company named uniQure, in order to get access to their coveted gene therapy technology platform for cardiovascular diseases. The two companies agreed to work together to battle these diseases with gene therapy. According to the Credit Suisse report:
Increased near-term immuno-oncology (I-O) estimates following the early stop of CheckMate ‘057 for Opdivo in non-squamous non-small cell lung cancer and longer-term estimates given continued positive newsflow in the I-O space. Also accounted for recent update to Erbitux agreement with Eli Lilly. Our operating margins in 2023 now approach 45% and, along with a 1.5% terminal growth rate and 7% WACC, help drive our $75 DCF-derived target price.
Shares of Bristol-Myers were down 0.5% Tuesday to $65.02, in a 52-week trading range of $46.30 to $69.20. The stock has a consensus analyst price target of $69.81.
Pfizer is the fifth-best Dow gainer so far this year at 11.2%. Many investors are operating under the premise that Pfizer is on the path to break up into two, or maybe even into three, companies. Its 3.2% yield also remains a draw. Still, patent cliffs are a constant challenge, and they are forcing Pfizer and other drug giants to look for opportunities in emerging pharma, biotech and internationally. Credit Suisse said in its report:
Most noteworthy change was increase in near-term and longer-term estimates for Ibrance in light of solid rollout to-date and early stop of PALOMA-3 trial due to positive efficacy. Note that our published numbers for PFE are for the stand-alone company and do not yet incorporate the HSP acquisition that is expected to close in 2H 2015.
Pfizer shares were relatively flat at $34.32, in a 52-week trading range of $27.51 to $35.53. The consensus analyst price target is $37.01.