3 Biotech Stocks Loved by Portfolio Managers Now
While September and the third quarter were train wrecks for almost every asset class, it was especially hard on the biotech sector. In fact, the Nasdaq Biotech Index was down 12% in September, versus a 3% decline in the S&P 500. Things really got worse late in the month when politicians rolled out the populist crowd winner of demanding lower drug prices and wanting change in the industry. Then the selling really picked up in earnest.
A new report from Cowen, while acknowledging that valuations probably really will start to matter more again, says the end is hardly nigh. It also points out that many skittish portfolio managers are anxiously awaiting third-quarter numbers for the top companies to make sure that the biotech thesis is still in place.
The report points to three stocks that are the most loved by the buy side and portfolio managers. Two are rated Outperform at Cowen, and one has a Market Perform rating.
This is one of the Outperform-rated picks and Cowen feels this large cap stock has solid upside potential for the rest of 2015 and next year, especially after the beating the biotechs have taken recently. Celgene Corp. (NASDAQ: CELG) has an outstanding partnered pipeline, which the firm thinks is low risk and has the potential to yield several blockbuster drugs. Some Wall Street analysts think Celgene can grow earnings 15% on a compounded annual growth rate basis going forward.
The company provided strong guidance earlier this year surrounding its Otezla launch and encouraging feedback from doctors on the potential of new triplet regimens in myeloma. Analysts across Wall Street are raising their estimates for the drug as, after a little more than a year on the market, Otezla, which treats psoriasis and psoriatic arthritis, has achieved considerable prescriptions among physicians.
Celgene’s blockbuster blood cancer drug Revlimid continues to dominate. Pomalyst sales grew nearly 46% year over year last quarter. Cancer drug Abraxane is also growing at a respectable rate, so the company continues to have a strong lineup of top-selling drugs. While second-quarter numbers were solid, the third quarter and the rest of the year could prove to be better.
The Cowen price target for the stock is $150. The Thomson/First Call consensus target is $149.59. Shares closed on Friday at $116.44.