Healthcare Business

3 Top Jefferies Biotech Stocks to Buy for 2016 With Huge Upside Potential

Lee Jackson

Like all sectors in the S&P 500, biotech has struggled mightily out of the gate this year. In fact, the iShares Biotechnology ETF is down a staggering 13% since the beginning of the year and 30% since last summer. Given the nature of the sector, it tends to move up and down faster in times of volatility and in market rallies. For aggressive investors looking to add shares or initiate positions, now may be one of the best entry points for the top stocks in the past few years.

In a recent research report, the team at Jefferies makes its picks for this year and has a positive feeling toward sentiment for the sector in the second half of 2016. The analysts note that continued populist drug pricing rhetoric from political candidates will remain through the election cycle and remind investors that certain therapeutic areas are very crowded trades at this point.

Ten top stocks make the grade as top picks at Jefferies, and we focus on three, two which are large cap sector giants and the other a top mid-cap company. All are rated Buy at Jefferies.

Biogen

Jefferies is very bullish on this large cap biotech leader, though the stock is down a stunning 40% from highs that were printed in March of last year. Biogen Inc. (NASDAQ: BIIB) discovers, develops and delivers to patients worldwide innovative therapies for the treatment of neurodegenerative diseases, hematologic conditions and autoimmune disorders. Founded in 1978, Biogen is one of the world’s oldest independent biotechnology companies, and patients worldwide benefit from its leading multiple sclerosis (MS) and innovative hemophilia therapies.

Jefferies has acknowledged in the past that the company’s core MS drug market faces challenges going forward, with most diagnosed patients now treated, payers limiting net benefits from price increases and competing entrants expected. With those issues in mind, Jefferies is still positive on Tysabri, especially for secondary-progressive multiple sclerosis, with upcoming clinical data a big factor.


The analysts also feel that a combination of cost reductions in tandem with the still strong MS franchise, which may not be as challenged by competitors as some on Wall Street think, can help the company beat earnings estimates this year. With a strong pipeline, the stock is a solid choice for aggressive growth investors.

The Jefferies price target for the stock is a gigantic $357. The Thomson/First Call consensus price target is even higher at $366.87. The stock closed Wednesday at $267.25.