In what has become truly the most challenging investing environment in decades, it is probably no surprise to most investors that health care is the top-performing sector this year in the S&P 500. Driving that solid performance is the strength in biopharmaceutical stocks, some of which are for companies pursuing a vaccine for the novel coronavirus. Handicapping who will be the vaccine winner is extremely difficult, and some of the bigger companies have been whipped around as details of clinical tests leak out.
A new Goldman Sachs research report, while positive on some of the vaccine contenders, is even more positive on some of the large-cap sector leaders. The analysts noted this when discussing the large-cap stocks in their coverage universe:
Notably, the large cap companies in our coverage and large cap biotech as a whole, have remained more insulated from COVID-19/macro factors in a defensive play as an initial flight to quality/safety sustained the group in general on the back of strong balance sheets and relatively intact revenue streams.
Four companies are highlighted in the research report as those the Goldman team likes into upcoming first-quarter earnings reports. All four are rated Buy.
This is a Wall Street favorites and a member of the Goldman Sachs Conviction List of top stocks to Buy. BioMarin Pharmaceuticals Inc. (NASDAQ: BMRN) develops and commercializes innovative biopharmaceuticals for serious diseases and medical conditions. Its product portfolio comprises five approved products and multiple clinical and preclinical product candidates.
Over the past decade, BioMarin has become one of the top orphan drug companies, and it looks poised to stay there. Roche recently has been mentioned as a company that could be looking at BioMarin. Roche is heavily focused on oncology drugs and invests heavily in early-stage molecules.
The Goldman Sachs price objective for the shares is $162, and the Wall Street consensus price target is way below that figure at $117.64. BioMarin stock closed trading on Friday at $97.31, up 4.5% on the day. The upside to the massive Goldman Sachs target is right at 70%. Earnings are expected to be reported on April 29.
This top mid-cap is rumored to be in the sights of a larger biotech company. Incyte Corp. (NASDAQ: INCY) has a current validated approach in hematology-oncology, and there’s reason to believe the three wholly owned clinical-stage assets the company has could drive several billion in revenue, something important for an acquiring company looking to acquire assets. Many on Wall Street are bullish on the company’s rich pipeline of small molecule therapies in all stages of development, and they see the company as a key player in the cancer space.
Incyte focuses on the discovery, development and commercialization of proprietary therapeutics in oncology. It offers Jakafi for the treatment of myelofibrosis and polycythemia vera cancers. The company’s commercial products also include baricitinib for rheumatoid arthritis, which was approved in early June by the FDA.
The analysts noted this regarding potential takeover interest:
Our M&A rank of “1” (representing a high probability (30-50%) of the company becoming an acquisition candidate) is related to its role as a commercial oncology story with a broad immuno-oncology pipeline.
Goldman Sachs has a $122 price target, well above the consensus target of $95.07. Incyte stock ended Friday trading at $103.48 per share. It is scheduled to post results on May 5.