Healthcare Business

5 Jefferies High-Conviction Health Care Stocks May Be Huge Q4 Winners


This has been touted as a potential takeover target, as it may be a very solid fit for a big medical devices player. Haemonetics Corp. (NYSE: HAE) provides products for processing, handling and analysis of blood. It offers plasma collection and storage products, including PCS brand plasma collection equipment and disposables, plasma collection containers, and intravenous solutions, as well as information technology platforms for plasma customers to manage their donors, operations, and supply chain.

Jefferies has been positive on Haemonetics for years and said this in the report:

Our updated NexSys adoption bridge analysis still calls for contract wins from several large customers (Grifols and CSL included) but now calls for revenue and earnings-per-share upside of $170 million and $2.20 (prior $150 million and $2.00) when the benefits of even higher yields from the PPN algorithm and more favorable pricing is considered.

The stunning $145 Jefferies price target compares with the $114.83 consensus target. Haemonetics closed at $87.12 a share on Friday.

Horizon Therapeutics

This may be another great play for more speculative investors. Horizon Therapeutics PLC (NASDAQ: HZNP) focuses on researching, developing and commercializing medicines that address unmet treatment needs for rare and rheumatic diseases in the United States and internationally.

The company’s orphan and rheumatology marketed medicines include the following:

  • Krystexxa, a medicine for the treatment of uncontrolled gout
  • Ravicti for use as a nitrogen-binding agent for chronic management of adult and pediatric patients
  • Procysbi for nephropathic cystinosis, a rare and life-threatening metabolic disorder
  • Actimmune for chronic granulomatous disease
  • Rayos for the treatment of multiple conditions, rheumatoid arthritis
  • Buphenyl tablets for oral administration and Buphenyl powder for oral, nasogastric or gastrostomy tube administration
  • Quinsair, a formulation of the antibiotic drug levofloxacin for the management of chronic pulmonary infections due to pseudomonas aeruginosa in adult patients with cystic fibrosis

Jefferies noted this:

The company’s two lead biologic drugs have no current competition, are long duration assets and have combined peak sales potential of $3-4 billion. Refractory gout drug Krystexxa is annualizing at ~$400 million and growing 25%+ year-over-year and we forecast peak potential sales of $1 billion+. Recently launched thyroid eye disease drug Tepezza has peak sales potential of $3 billion+ and may already be annualizing at $750 million+ after just seven months on the market. We expect 25%+ annual growth over the next 3-4 years irrespective of the macro-economy, leading to upside to ours and consensus numbers.

Jefferies has set a $90 price objective. The consensus target is $97.25, and Horizon Therapeutics stock ended last week at $78.25 a share.

Vertex Pharmaceuticals

This is a very aggressive biotech idea for investors with risk tolerance. Vertex Pharmaceuticals Inc. (NASDAQ: VRTX) engages in discovering, developing, manufacturing and commercializing small molecule drugs for patients with serious diseases in specialty markets. The company focuses on developing and commercializing therapies for the treatment of cystic fibrosis (CF) and hepatitis C.

The company markets Trikafta, Symdeko/Symkevi, Orkambi and Kalydeco to treat patients with CF who have specific mutations in their CF transmembrane conductance regulator gene. It is also developing VX-814, which is in Phase 2 clinical trial, and VX-864, which is in Phase 1 clinical trial for the treatment of alpha-1 antitrypsin deficiency; VX-147 for treating kidney diseases; and CTX001, which is in Phase 1/2 clinical trial for the treatment of beta-thalassemia and sickle cell diseases.

The analysts noted this:

Vertex is a relatively easy story to own, with the CF franchise expected to pull in $6 billion+ in sales this year (even during COVID). We like the pullback here, as the company’s robust pipeline of 4-5 candidates could potentially add another $5 billion+ of revenue opportunity over the next few years (and the stock should move higher if any of these work).

The Jefferies price target is $340. The consensus target is $306.43, and Vertex Pharmaceuticals close most recently at $268.18 a share.

These five high-conviction health care stock picks from the analysts at Jefferies all make sense for investors looking to gain exposure to a sector that should continue to do well the rest of 2020 and for years to come, given the aging population both here and around the world.

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