The biopharmaceutical industry has been one of the most resilient in dealing with the coronavirus pandemic. While the Dow Jones industrial average and S&P 500 have struggled to get back to even for the year, the Nasdaq is hitting record high after record high. Two contributing factors are in play, health care stocks and big tech.
It’s no secret that Amazon, Apple and Facebook have been a huge contributing factor of the recovery for the broad markets, by the sheer weighting of the S&P 500 alone. However, biopharma or health care stocks have aided this recovery and really turned it into a rally for the Nasdaq.
The iShares Nasdaq Biotechnology ETF (NASDAQ: IBB) is up about 14% year to date, while the Dow Jones and S&P 500 are still under their February highs. In the past six months, the exchange-traded fund is up closer to 16%, while the Dow and S&P 500 are down 7% and flat, respectively.
Note that even while the markets have run a great deal since the end of March, there are companies that are still lagging the recovery. What may be more shocking is that a number of big names across the biopharma industry make the list. If anything, these companies may be undervalued, considering the progress in general, or at least considering the vaccine timeline to normality.
For the most part, investors have run to the dividends of big pharma and to the limitless upside of major biotech outfits for years, and 2020 seems to be no exception. However, valuations are no longer considered high for these two health care arenas, and some investors would consider even the large biotechs to be “cheap” based on historic earnings and sales multiples with upside ahead.
There is just one small problem looking at major drug and biotech companies. They are all considered to be close to their fair market value.
Right now, most investors probably will expect perhaps 8% to 10% upside in the most established biotechs and pharma stocks, looking out beyond the end of 2020. A quick screen of what analysts are targeting leaves very few options for big upside in the established companies. Again, these are the larger companies with products on the market, and in the biopharma stocks that do not have COVID-19 fever having driven their stocks to the moon and beyond.
24/7 has compiled a few big-cap names that have lagged the markets and recently have reported earnings. In a sense, the fundamentals have shown some light on these stocks, that they may be inexpensive picks going forward. Also, a number of these have plays in COVID-19, yet it doesn’t seem to be recognized.
We have included some brief analysis on each company, as well as a recent trading history and what the analysts are calling for from the stock.
Gilead Sciences Inc. (NASDAQ: GILD) isn’t working on a vaccine for COVID-19, but instead is working to treat some of the most seriously affected patients. The company announced the pricing of its COVID-19 treatment, remdesivir, only last week. At the price of $2,340 for a five-day treatment in the United States and some other developed countries, Gilead can turn a solid profit. Note that the U.S. Food and Drug Administration has not yet approved it for any use.
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