Although markets have pulled back so far in September, many are viewing this as a technical correction, as the markets ran very hot in a very strong August. Market corrections happen regularly, and it should not discourage investors from buying the dip or even pulling their money out. Despite this pullback, one sector is looking to take off in the latter part of this year and even into 2020.
The health care sector, some biotech stocks in particular, are looking to explode in 2021. The iShares Nasdaq Biotechnology ETF (NASDAQ: IBB) is only up about 7% year to date and 26% in the past 52 weeks. There have been some breakout companies as a result of the coronavirus pandemic, but other catalysts will be playing into the expected gains as well.
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Practically any company attempting almost anything COVID-19 related has seen massive gains. However, other big winners in the industry are not tied to the pandemic, and there are likely more to come for the rest of the year and even into next year.
Remember that biotechs offer big risk but big rewards as well. These are seen as some of the more speculative companies in the market because a single clinical trial could be either a huge sunk cost or the next blockbuster drug.
24/7 Wall St. has compiled a list of some biotech companies that could see massive gains in the coming months. Remember that no single analyst call should ever be used as a sole reason to buy or sell a stock, but they do offer insight when doing research on these individual stocks.
Alexion Pharmaceuticals
Despite a history of not pleasing investors, there are a lot of positive trends currently going on with Alexion Pharmaceuticals Inc. (NASDAQ: ALXN) that could be viewed favorably in the months ahead. Low valuations, continued growth, beating earnings, raising guidance, activist investors, loose merger hopes, an expanded and diversified drug pipeline and higher analyst price targets just might all add up to something for longer-term investors.
Activist firm Elliott Management has noted rumors of an Amgen deal and said that the best return for shareholders would be from an acquisition of the entire company. While an acquisition may bring upside, there may be concerns of slower growth derived from a history of underwhelming acquisitions. In short, Amgen might not want to pay a premium for a company that hasn’t made great work of its own expensive deal-making in recent years. While most investors love to hear that a potential acquisition may be the case, the reality is that investors should never view a company solely because it could see an acquisition down the road.
SVB Leerink has an Outperform rating and a $163 price target, the highest target on Wall Street. Other notable analysts have made similar calls. Raymond James reiterated an Outperform rating with a $151 price target, and SunTrust Banks reiterated a Buy rating with a $155 price target.
Alexion Pharmaceuticals stock closed Wednesday at $108.28 a share, in a 52-week range of $72.67 to $121.50. The consensus price target is $141.32.
Biogen
Biogen Inc. (NASDAQ: BIIB) has been range-bound for five years and has a $43 billion market cap. The consensus price target of $305.39 implies over 10% upside from the current price. While Biogen has led the way in multiple sclerosis treatments for years, the big upside catalyst, if it gets approved, will be the Alzheimer’s treatment, as there are no current drugs approved by the FDA that actually help treat or slow the progression. That is far from a certain outcome here, and it was once ruled as “dead on arrival” but any Alzheimer’s treatment approved by the FDA is probably guaranteed to bring untold additional billions in sales.
Analysts in general are calling for significant upside for Biogen. Credit Suisse has the highest price target out of the group at $375, along with an Outperform rating. SVB Leerink has a price target of $342, and in July Morgan Stanley lifted its price target to $357.
Biogen stock closed most recently at $272.51, in a 52-week range of $219.70 to $374.99.
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Royalty Pharma
After a high-flying initial public offering, Royalty Pharma PLC (NASDAQ: RPRX) shares have flamed out and hit new lows. It is still worth about $24 billion, but analysts may be getting discouraged here, which could lead to some robust targets being trimmed. The consensus on last look was above $50, compared with a less than $40 price now. The stock did trade at $56 or so for a few minutes back in June (after the IPO priced at $44).
That said, Royalty Pharma is hardly a true biotech, and not even a true pharma stock. The New York-based outfit is simply an acquirer of biopharmaceutical royalties, and it funds innovation in the biopharmaceutical industry for stakes or royalties. The company has royalty streams from Atripla, Humira, Neulasta, Neupogen, Remicade, Rituxan, Tecfidera, Trikafta, Truvada, Tysabri, Xtandi and many more.
Royalty Pharma stock closed at $38.84 on Wednesday, in a post-IPO range of $38.70 to $56.50. The consensus price target is $52.29.
Gilead Sciences
Acquisitions and partnerships haven’t helped Gilead Sciences Inc. (NASDAQ: GILD), which has remained unloved for the better part of the past five years. Even the controversial hydroxychloroquine has been shouted down. At the most recent closing price of $64.51 per share, the consensus analyst target is still $77.75, which is less than the 52-week high of $85.97.
Barron’s even reported in August that Gilead’s COVID-treatment sales could top $3 billion. Cantor Fitzgerald and Piper Sandler have above-consensus targets of $84 and $83, respectively. SVB Leerink had the highest target on the street at $95, which implies an upside of 47% or so from Wednesday’s closing price.
24/7 Wall St.Regeneron Pharmaceuticals
After its would-be COVID-19 drug partnership with Sanofi failed, Regeneron Pharmaceuticals Inc. (NASDAQ: REGN) has come back down from its highs. At a little over $571 a share, it is now more than $100 under its consensus, and there are other drugs going in its favor. Regeneron has a market cap of just over $60 billion.
Despite the Sanofi partnership for Kevzara failing, the drugmaker partnered with Roche last month to make and supply COVID-19 antibody cocktails. Regeneron already has signed a $450 million deal with the U.S. government under the Operation Warp Speed program.
It is important not to count Regeneron out yet, especially when Goldman Sachs has the highest price target on Wall Street for the stock. The investment house’s Buy rating comes with an $800 price target. A few other notable analyst calls are SunTrust’s Buy rating and $750 price target, as well as the Outperform rating and $725 price target from both Credit Suisse and Oppenheimer.
Regeneron stock last closed at $571.15, in a 52-week range of $271.37 to $664.64. The consensus price target is $674.63.
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