Top Biotechs With Upside Ahead of Earnings (GILD, AMLN, ARIA, INCY, JAZZ, DNDN, HGSI, ILMN, AMGN, CELG, BIIB, BMRN, LIFE, REGN, AMLN, CBST, ONXX, THRX, VPHM)
Earnings season is afoot and we wanted to see how the analysts are ranking the top biotech stocks before these companies begin their earnings reports. We pulled the top biotech and biohealth related stocks which have market caps of $1 billion and higher and we broke these out into three separate groups by size. The large-cap biotechs are ranked in descending order by size. The stocks under $10 billion in market cap and then under $3 billion were broken out in alphabetical order.
We have compiled some color on selected names, but we also listed the current trading prices, the implied price targets from Thomson Reuters, gave multiples of earnings estimates (from Thomson Reuters) for the forward year (2012 in most cases), showed the trading history and listed a price-to-book ratio. We did not take any merger news into consideration so that we could just show an as-is model here.
Of the large cap stocks in biotech, Gilead Sciences, Inc. (NASDAQ: GILD) was the leader. Several other standouts in the biotechs under $10 billion with a high degree of expected upside were as follows: Amylin Pharmaceuticals, Inc. (NASDAQ: AMLN), ARIAD Pharmaceuticals, Inc. (NASDAQ: ARIA), Incyte Corporation (NASDAQ: INCY), and Jazz Pharmaceuticals, Inc. (NASDAQ: JAZZ). Other biotechs such as Dendreon Corporation (NASDAQ: DNDN), Human Genome Sciences, Inc. (NASDAQ: HGSI) , and Illumina, Inc. (NASDAQ: ILMN) also screen out as those with the most upside, but that is because of huge share price drops of late.
THE $10 BILLION AND OVER IN MARKET CAP
Amgen Inc. (NASDAQ: AMGN) is the largest of the independent biotechs and it remains stuck like Chuck. At $56.71, the consensus target is $64.85 and the stock trades at a mere 10-times 2012 earnings estimates. Its 52-week range is $47.66 to $61.53 and its market cap is north of $52 billion. It is also worth about 2-times book value. Implied Upside: 14.3%.
Gilead Sciences, Inc. (NASDAQ: GILD) trades around $40.37 and estimates have a consensus price target of $47.96. This forward earnings multiple is only about 9.0 now. The 52-week range is $35.28 to $43.49, the market cap is $31.1 billion and the company trades at more than 5-times book value. Implied Upside: 18.5%.
Celgene Corporation (NASDAQ: CELG) trades at $64.97 and the consensus price target is about $71.86. This one is more expensive than many of the established biotech players at more than 15-times forward earnings. Celgene’s 52-week range is $48.92 to $67.01, its market cap is $29.8 billion, and it trades at nearly 5-times book value. Implied Upside: 9.8%.
Biogen Idec Inc. (NASDAQ: BIIB) remains the big-cap recovery stock of biotech. At $102.00, its consensus price target is $110.36, and it trades at close to 16-times forward earnings. The market cap is about $24.7 billion, the 52-week range is $57.58 to $109.63, and the company is worth about 4-times book value. Implied Upside: 8.5%.
UNDER $10 BILLION IN MARKET CAP
BioMarin Pharmaceutical Inc. (NASDAQ: BMRN) trades at $33.05 and analysts have a consensus price target of $36.25. Unfortunately, this one is expected to lose money this year at -$0.31 EPS and next year’s earnings are expected to be -$0.04. The 52-week range is $21.70 to $34.50, its market cap is $3.7 billion, and it is listed as trading at close to 5.0-times book value. Implied Upside: 9.6%.
Illumina, Inc. (NASDAQ: ILMN) trades around $26.56 and the consensus price target is about $42.90. The company trades at more than 18-times next year’s earnings estimates, its 52-week range is $25.57 to $79.40, its market cap is about $3.3 billion, and it trades at almost 2.9-times its book value. Implied Upside: 62%.
Life Technologies Corporation (NASDAQ: LIFE) may be difficult to compare after a huge run higher followed by a recent tank in the share price. It is also on the equipment side. Shares are back down around $37.24 and the consensus analyst price target is now down to $52.66. The company now trades at barely 9-times forward earnings, if you trust the “E” in that P/E ratio. LIfe’s 52-week trading range is $35.30 to $57.25, its market cap is about $6.7 billion, and the stock is worth about 1.5-times the stated book value. Implied Upside: 41%.
Regeneron Pharmaceuticals, Inc. (NASDAQ: REGN) trades around $60.00 after a large drop due to a $400 million convertible note offering. The consensus price target is about $66.14. The company is also expected to lose as much as $2.00 per share in 2012. It has a 52-week trading range of $24.29 to $79.90, its market cap is $5.5 billion, and it trades at more than 12-times its previously stated book value. Implied Upside: 10.1%.
UNDER $3 BILLION IN MARKET CAP
Amylin Pharmaceuticals, Inc. (NASDAQ: AMLN) trades around $10.14 and the consensus price target from analysts is $13.44. The 52-week trading range is $8.03 to $21.23, its market cap is about $1.5 billion, and it is worth about 4.6-times book value. Implied Upside: 32.5%.
ARIAD Pharmaceuticals, Inc. (NASDAQ: ARIA) trades around $10.25 and the consensus price target is $15.44. The company is expected to have losses this year and next. Its 52-week trading range is $3.51 to $13.50, its market cap is $1.35 billion, and the book value at the last report was barely positive. Implied Upside: 50%.
Cubist Pharmaceuticals, Inc. (NASDAQ: CBST) was another big winner earlier in the year and its shares are now at $36.71 versus a consensus price target of $40.82. This used to be a value stock but now trades at closer to 22-times next year’s earnings estimates. The 52-week range is $20.81 to $39.29, the market cap is $2.24 billion, and it trades at just over 3-times book value. We once considered this a biotech buyout target, but that is in the past. Implied Upside: 11%.
Dendreon Corporation (NASDAQ: DNDN) shares are now around $9.40 and the consensus analyst target has come down all the way to $13.72. The company has no forward P/E ratio now as it is expected to lose money. The 52-week range is $7.81 to $43.96, its market cap is down to $1.4 billion, and it is listed as being worth more than 3-times its own stated book value. Implied Upside: 45%. Shares have fallen far from grace, so analyst targets and the ratios may all look a bit off. We also cannot count on estimates since the analysts and the company got this one so wrong on the end demand for Provenge. Now we have to hope that Provenge can have many more expanded uses outside of prostate cancer or this is a hard one to follow. What is odd is that Provenge is being tested for other uses and those could reignite interest if more promising data ever comes out. If not, let’s just say this was a painful lesson in biotech.
Human Genome Sciences, Inc. (NASDAQ: HGSI) is now up around $12.81 after buyout rumors and the consensus target is still listed as being roughly $24.00. The company trades at about 24-times next year’s earnings estimates, its 52-week range is $10.40 to $30.15, its market cap is now under $2.5 billion, and it is worth about 5.3-times its book value. Implied Upside: 87%.
Incyte Corporation (NASDAQ: INCY) trades around $14.04 and anlaysts have a consensus price target of $22.92 on the stock. It is expected to lose money this year and next year and the 52-week range is $12.58 to $21.15. While there is a $1.77 billion market cap, Incyte’s is listed as having a negative book value as laibilities exceed assets. Implied Upside: 63%.
Jazz Pharmaceuticals, Inc. (NASDAQ: JAZZ) trades around $40.00 after a sharp drop due to an FDA warning. That may make the figures a bit distorted. The consensus price target is $54.00 but that does not include the FDA impact. Jazz trades at only about 10.6-times next year’s earnings estimates. Its 52-week range is $10.51 to $47.88, its market cap is almost $1.7 billion, and the company trades at close to 16-times an implied book value. Implied Upside: 35%.
ONYX Pharmaceuticals, Inc. (NASDAQ: ONXX) trades at close to $34.50 and the consensus target is closer to $44.60. It is one which is also expected to lose money this year and next year. The 52-week trading range is $26.17 to $45.90, its market cap is $2.2 billion, and the stock trades at close to 3.5-times its book value. Implied Upside: 29.2%.
Seattle Genetics, Inc. (NASDAQ: SGEN) trades around $20.50, above the $19.15 consensus analyst price target. The company is expected to lose money in 2011 and 2012. With a 52-week range of $12.29 to $22.37, its market cap is $2.35 billion, and it trades at close to 9-times book value. Implied Upside: NEGATIVE by -6.5%.
Theravance, Inc. (NASDAQ: THRX) trades around $21.40 and analysts have a price target of $27.43 for the stock. The company is another one expected to lose money this year and next. The 52-week range is $16.44 to $28.95, the market cap is $1.8 billion, and it is another one that trades with a negative tangible asset level. Implied Upside: 28%.
ViroPharma Incorporated (NASDAQ: VPHM) trades around $19.00 and the consensus price target is $23.54. Due to an expected drop in royalties, its earnings are expected to be halved in 2012 versus 2011. Its 52-week range is $14.39 to $22.16, its market cap is about $1.45 billion, and it trades at about 1.5-times its stated book value with a large portion of assets as intangible assets. How this one looks on a standalone basis through time is a guess. Implied Upside: 24%.
On all of these implied upsides, please be sure to do your own research. We encourage our readers to challenge Wall Street analysts rather than merely following them blindly. Many cases have been there before were the analysts were just dead wrong. We also cannot help but notice how the biotech sector often has two very same observations based upon the exact same set of data, yet one analyst will say “Buy” and the other will say “Sell.”
JON C. OGG
We recently have picked back up on searching for ten-baggers in the field of biotechnology and those companies tied to a broader “BioHealth” sector. Ten-baggers are those which can rise tenfold, or 1,000% from their lows, and these are generally measured from an extreme low in the shares. Occasionally you do get to see a legitimate Wall Street analyst calling for a stock to more than double. That is exactly what we are seeing this morning in shares of Vical Inc. (NASDAQ: VICL). Canaccord Genuity initiated coverage with a “BUY” rating and it assigned a whopping $8.00 price target objective based mostly upon its Allovectin-7 as a potential malignant melanoma treatment.
Before we get too far into the Canaccord call, it was just recently that we issued a potential ten-bagger alert in Prana Biotechnology Ltd. (NASDAQ: PRAN). It was after this note that a portfolio manager sent us an email as to why Vical was “his ten-bagger pick” in the space based in part on the belief that A-7 will get FDA approval after its results. And, yes, he did disclose that he owned the position. The portfolio manager’s biggest point is a true one: Prana may be a decade out, Vical is a 2011 to 2012 event.
Back to Canaccord Genuity… Vical closed at $3.25 on Monday and the 52-week trading range is $1.70 to $4.05. What Canaccord Genuity did was issue a research report calling for almost 150% upside. This is not unheard of, but calling for 100% upside in a formal research report is generally thought of as being extremely optimistic. This call was for 146%. There are very few analysts which cover Vical at this time and the consensus price target is about $5.50 per share.
OK, so almost 10% of that upside has already been spoken for. Vical shares were up 9.5% at $3.52 on more than 1 million shares even right before Noon today. Here is what Canaccord Genuity sees that the rest of us haven’t yet considered or caught on to as of yet:
- Anticipation of appreciation going into A-7′s Phase III melanoma trial results maturing in the first half of 2012.
- Bristol-Myers Squibb (NYSE: BMY) was referenced as a point for stand of care and as a recent approval by the FDA. A7 is noted as having even better results, with a 7.5-year survival rate in some of its patients.
- A7 also had a lower adverse event-risk than Yevoy with positive survival data. A-7 was said to absent of Grade 3/4 adverse events.
- The firm now models $1 billion in combined US/EU sales by 2018.
- Almost all of Vical’s market cap is based upon its A7 as an oncology asset, but the belief is that A7 will reflect well upon its entire vaccine platform. The company’s valuation is believed to be back-stopped by the DNA-based vaccine technology platform.
There are of course some risks. The obvious is that clinical trials could fail or that regulatory hurdles could arise, and there is also a risk that competition could change. Canaccord further noted that Vical had $52 million in cash at the end of 2010 and that should be ample to fund clinical trials and operations into the second-half of 2012.
There is also an Amgen Inc. (NASDAQ: AMGN) reference here. Canaccord’s team noted, “Data from a proof-of-concept trial evaluating Amgen’s newly acquired OncoVEX also supports immunotherapy potential in this indication.” Canaccord also gave a pipeline chart with the status of each candidate, shown by name, target, who the product partner is, and what stage these are in:
- Allovectin-7 AnGes, Teva Phase 3
- TransVax none Phase 2
- HIV DNA vaccine none Phase 2
- Malaria DNA vaccine none Phase 2
- Ebola vaccine NIH Phase 1
- H1N1 Pandemic Influenza virus US Naval Medical Research
- Center collaboration Phase 1
- H5N1 pandemic flu vaccine none Phase 1
- SARS vaccine NIH Phase 1
Vical has a market cap of $255 million even after today’s move. Biotech and biohealth companies typically trade at mulotiples of revenues rather than at fractions of revenues. Analysts only see $21 million 2012 revenues, so that “multiples” is true today. The difference is what happens if Vical can actually ramp up to that $1 billion in sales by 2018. There could still be a lot more to this story, particularly when Vical gets the call for its virus vaccine prgram any time the government gets scared about a new potential pandemic outbreak like SARS, pandemic flu, and worse.
JON C. OGG
A bullish research call on Dendreon Corporation (NASDAQ: DNDN) by Gleacher & Co. has so far been unable to prevent some pullbacks along with a broader market that is spooked by international geopolitical events. Still, the research does lend credence to further upside for Dendreon based on its Provenge. While not a target in the research call, we would throw out that there is some new indication from Amgen Inc. (NASDAQ: AMGN) in the war against prostate cancer as well.
Gleacher & Co. this morning initiated coverage of Dendreon with a “Buy” rating and assigned a $42.00 price target. The report from analyst Ying Huang notes, “we are encouraged by the survey results indicating that 40%-50% of castration-resistant prostate cancer (CRPC) patients in the US will be treated with Provenge.” Furthermore, the call indicates that Provenge will become a blockbuster drug with sales north of the $ 1 billion mark, with a projected peak of roughly $2.2 billion in worldwide sales for Provenge. This based on no off-label usage as well.
The firm surveyed 47 physicians, 35 urologists and 12 medical oncologists, who collectively treat more than 17,000 patients with metastatic castration-resistant prostate cancer. The indication is that medical oncologists give higher ratings to the safety and efficacy of Provenge than urologists. The oncologists projected that the use of Provenge will be in 50% of eligible CRPC patients versus a 39% projection by urologists.
All in all, Huang sees a 30% U.S. market penetration and a 15% E.U. market penetration. Huang sees FDA approval of a new manufacturing plant and believes that the CMS will ultimately approve the $93,000 cost for the approved label usage but not for off-label usage.
Dendreon shares are currently down 1.2% at $32.17 but the stock was in positive territory this morning above $33.00 per share. The implied upside from today’s level would be more than 30% to the Gleacher & Co. target price of $42.00 per share.
As a reminder, Dendreon has been called a takeover candidate by some.
JON C. OGG
M&A Bonanza For Drug & Biotech in 2011 (MRK, PFE, ALXN, DNDN, HGSI, CEPH, UTHR, CADX, AMAG, SNY, GENZ, AMGN, BEC, TEVA, SGMO, LLY, ALTH, CBST, VVUS, AUXL, VRTX)
The game of predicting mergers and acquisitions in the biotech and in pharma sectors is not a new one. The talk heats up, then it dies down. A deal comes, followed by another deal, and the activity goes quiet. This next week is likely to have at least more chatter in the biohealth sector for possible mergers and acquisitions after Barron’s gave a cover story called “The New Doctor in the House: Consolidation.”
Barron’s noted that “as big drug firms buy up smaller, specialty outfits and their most innovative products, better pipelines and sales-force efficiency will boost profits.” Here is the thing to consider: Barron’s did not really offer anything new or ground-breaking this weekend. It will have rekindled some hope that M&A is coming in the space. At issue: pipeline fatigue. A note we’d throw in as well, dead-dead stocks. We are going to at least address some of the Barron’s roster, but we want to show you many others which are just as or even more likely acquisition targets. Some of ours have even been in-play before.
Barron’s threw in Merck & Co. (NYSE: MRK) and Pfizer, Inc. (NYSE: PFE) as the largest of the Big Pharma players and it threw out biohealth names with stock-market values below $10 billion:
- Alexion Pharmaceuticals, Inc. (NASDAQ: ALXN) with a $7.5 billion value after a hueg run-up;
- Dendreon Corporation (NASDAQ: DNDN) for Provenge for prostate cancer (and future cancers) with a $5 billion market value today;
- Human Genome Sciences, Inc. (NASDAQ: HGSI) for its Benlysta in patients with severe active lupus nephritis and CNS lupus and a $4.5 billion market cap;
- Cephalon, Inc. (NASDAQ: CEPH) is one we have rarely looked as since things quieted down there;
- United Therapeutics Corporation (NASDAQ: UTHR) for its treat pulmonary arterial hypertension and an almost-$4 billion value;
- Cadence Pharmaceuticals Inc. (NASDAQ: CADX) was noted for its pain medication without the addiction aspects of morphine and its value is only $369 million;
- AMAG Pharmaceuticals, Inc. (NASDAQ: AMAG) was called a value stock despite its recent weak sales and despite its cash burn with a $368 million market cap.
Much of the biotech M&A game hinges on Sanofi-Aventis (NYSE: SNY) in its chase to acquire Genzyme Corporation (NASDAQ: GENZ). The latest talk is that a work-out could come to $80 all-in if certain milestones were achieved but the deal is still south of there officially. As noted above, we have our own opinions on which biotech companies and drug companies could find their way into the hands of a larger acquirer.
Amgen Inc. (NASDAQ: AMGN) is likely to continue being an acquirer. The company recently announced a deal worth potentially $1 billion to acquire privately-held BioVex. Last year the company said it was aggressively looking for new targets and its $52 billion market cap is the largest of all the independent biotechs in America. The company has more tricks up its sleeve.
Beckman Coulter Inc. (NYSE: BEC) went into play in early December with private equity firms being the likely acquirers of the portfolio of biomedical testing equipment and supplies. We argued at the time of the premium that it seemed shares fully reflected that value, and shares are actually lower now.
And don’t forget Sangamo Biosciences Inc. (NASDAQ: SGMO), where shares rallied in November on rumors of a potential bid interest from Eli Lilly & Co. (NYSE: LLY). It had good news on ZFP Therapeutic program to develop SB-509, a zinc finger protein transcriptional activator (ZFP-TF) of the vascular endothelial growth factor (VEGF)-A gene as a treatment for ALS and the news flow has continued to propel shares higher. It went above $4.50 on the rumors but now shares trade at $7.39. The market cap is still low here at $334 million.
Allos Therapeutics, Inc. (NASDAQ: ALTH) has been another name floated out there for M&A possibilities, but things are looking less and less bright for the company. Shares hit a 52-week low just on Friday.
Cubist Pharmaceuticals Inc. (NASDAQ: CBST) has not really gone anywhere as it is deemed a mature company, but it is one we thought for sure that would find its way into being part of a larger company. Its Cubicin is on the market and it fights severe hospital-induced infections and the market cap is $1.3 billion here.
VIVUS Inc. (NASDAQ: VVUS) remains a wild card due to the FDA. Diet and weight-loss pills have not been given any real love by the FDA. The exception here is that Qnexa does have serious benefits. There are side effects, particularly in cases of pregnancy. We would ask this though: How many pregnant and soon-to-be-pregnant women really diet? Most doctors don’t even want pregnant women taking supplements, let alone drugs. IF the FDA approves Qnexa, that $680 million market cap may be worth far more.
Teva Pharmaceutical Industries Limited (NASDAQ: TEVA)… We have also noted Teva’s mega-cap ambitions, and making more acquisitions would generally get there.
Last year, Morningstar put out a list of three favorites that it sees as acquisition targets in the biohealth space: Auxilium Pharmaceuticals Inc. (NASDAQ: AUXL), Human Genome Sciences Inc. (NASDAQ: HGSI), and Vertex Pharmaceuticals Incorporated (NASDAQ: VRTX). FULL ARTICLE
This should at least give you a better and more concise list of possible deals and deal-makers for 2011. Just remember this, regardless of what Barron’s or other media outlets try to tell you: not all biotechs have to be acquired, not at all.
JON C. OGG
Top BioHealth Research Calls of the Week (MNKD, PDLI, ILMN, CLDA, MRK, PFE, LLY, BMY, ALXN, SVNT, AMGN)
There were some key research calls in biotech and biohealth shares this week. Over in our “top five analyst calls of the week” at 24/7 Wall Street we noted how one firm came out in defense of MannKind Corporation (NASDAQ: MNKD) on its implosion this week and another call was highlighting the potential upside value that remains in PDL BioPharma, Inc. (NASDAQ: PDLI) despite its patent fight concerns. There were many other standout calls though in analyst coverage this last week in biohealth:
Illumina Inc. (NASDAQ: ILMN) has remained impressive after having been one of our “Best of Big BioHealth in 2010″ and was also at the start of the year listed as “an overvalued biohealth names with peers.” This week brought an analyst duel. Citigroup raised its rating to BUY from Hold and the new price target is $85.00 per share. Thomson Reuters has a consensus price target of $66.87 and the Citi target appears to be the street-high price target. Elsewhere, RBC Capital Markets lowered the rating to Sector Perform from Outperform due to valuation. Illumina’s 52-week range is $34.25 to $71.07, and at $68.75 it has a market cap now of $8.6 billion.
Clinical Data Inc. (NASDAQ: CLDA) will be one to watch this coming week after the FDA approved its antidepressant drug to be sold under the brand name Viibyrd. Shares closed at $15.03 on Friday but were much higher after the news and the 52-week trading range is $10.87 to $22.39. What is interesting is that analysts already see peak sales above $2 billion as this antidepressant is believed to not interfere with sexual desire as much as in some rival drugs. The consensus price target is already $29.67 per Thomson Reuters data.
This week came a standout call in Big Pharma from Wells Fargo as the firm raised the sector to “Overweight.” Wells Fargo raised Merck & Co. (NYSE: MRK) and Pfizer Inc. (NYSE: PFE) to Outperform ratings and also noted Eli Lilly & Co. (NYSE: LLY) and Bristol-Myers Squibb Company (NYSE: BMY) in the call.
Alexion Pharmaceuticals, Inc. (NASDAQ: ALXN) closed the week out at $84.43 and has a 52-week range of $44.86 to $87.14. There was an analyst duel this week. Gleacher & Co. raised its rating to Buy while UBS cut its rating to Hold.
Savient Pharmaceuticals, Inc. (NASDAQ: SVNT) hit new 52-week lows this last week and closed at $10.20 versus a 52-week range of $10.16 to $23.46. Its shares were downgraded to “Underperform” over at Bank of America Merrill Lynch after previous news in its business update of reports of batch failures with its new gout medication called Krystexxa.
Amgen Inc. (NASDAQ: AMGN) is set to report earnings on Monday and Thomson Reuters has estimates of $1.10 EPS and $3.8 billion in revenues; for the next quarter estimates are $1.31 EPS and $3.67 billion in revenues. At $56.97 shares are actually down slightly from 90-days ago and the 52-week range is $50.26 to $61.26. This stock is getting toward its higher end of a 3 year trading band, so we expect that analyst will have to make some adjustments after earnings. Thomson Reuters has an average price target above $65.00 currently.
At the end of December, we gave a list of Big Biotechs With teh Most Upside in 2011.
Those are definitely not all of the research calls of the week in biotech and biohealth names, but this was a fairly busy week.
JON C. OGG
Bioheath Investor is creating some ongoing outlook pieces as 2010 ends so we have an outline of what to expect for 2011. We have already given the “Best of Big Biotech in 2010″ and now we want to focus on “The Big Biotechs With The Most Upside for 2011.” Using “Big Biotech” implies market caps of those with a market cap of $1 billion or higher. It was surprising that many of those big biotechs are actually trading much higher than their projected price targets.
Our screen generated 7 of the pack with implied upside of more than 15% for 2011. Those making the screen were Amgen Inc. (NASDAQ: AMGN), Gilead Sciences, Inc. (NASDAQ: GILD), Celgene Corporation (NASDAQ: CELG), Human Genome Sciences, Inc. (NASDAQ: HGSI), Dendreon Corporation (NASDAQ: DNDN), Incyte Corporation (NASDAQ: INCY), and Acorda Therapeutics, Inc. (NASDAQ: ACOR) made the grade for those with the most implied upside to the average analyst price targets with a one-year horizon.
We did create a brief table showing the tickers, the current price, the implied analyst consensus price target from Thomson Reuters, the implied upside to that target, and the 52-week trading range. More importantly, we gave an added breakdown on each with supporting data and color for building such an outlook.
|Stock||Current||Target||Implied Gain||52-Week Range|
|AMGN||$56.13||$65.39||16.5%||50.26 – 61.26|
|GILD||$36.54||$44.67||22.2%||31.73 – 49.50|
|CELG||$60.28||$70.48||16.9%||48.02 – 65.79|
|HGSI||$24.63||$35.17||42.8%||20.56 – 34.49|
|DNDN||$35.81||$52.73||47.2%||25.78 – 57.67|
|INCY||$16.81||$21.08||25.4%||8.50 – 17.48|
|ACOR||$27.60||$33.58||21.6%||24.99 – 40.48|
Amgen Inc. (NASDAQ: AMGN) has been range-bound for so long that we have called it a Big Pharma company masquerading as a biotech. It is THE largest of all U.S.-based biotechs out there. The 16.5% implied upside to a consensus target of $65.39 would mean a multi-year high as this one has been greatly range-bound in a $50 to $60 range. We’ll be looking forward to more data on its prostate cancer indication possibilities. The market cap here is well over $50 billion and it has so far survived its political risks and reimbursement risks from Washington D.C. What else is there really to add?
Gilead Sciences, Inc. (NASDAQ: GILD) has a high implied upside of more than 22% and it ranks among the biggest biotechs in the world with its $29.6 billion market cap. The implied target of $44.67 has already been breached before as the 52-week high is $49.50. Gilead even peaked at $55 back in 2008 before the meltdown. Its recent loss may have become InterMune’s gain.
Celgene Corporation (NASDAQ: CELG) has become harder and harder to evaluate on its valuation versus growth, but grown it has… even if shares have been range-bound. Its market cap is north of $28 billion based on REVLIMID, THALOMID, and others. If it makes that near-17% upside to $70.48, that will be a new 52-week high and will be within striking distance of the 2007 and 2008 highs.
Human Genome Sciences, Inc. (NASDAQ: HGSI) is the #2 stock of the implied upside stocks worth more than $1 billion. The implied event is the FDA review of Benlysta for lupus in March 2011 and if approved it would be the first lupus treatment in the last 50 years. While the implied upside is almost 43% to $35.17, Human Genome shares have already traded as high as $34.49 over the last year. Two recent analyst calls could not have been more opposite.
Dendreon Corporation (NASDAQ: DNDN) won the pole position as #1 with the most implied upside. Dendreon is a 2011 story as it telegraphed that its Provenge is likely to see a later in the ramp up and back-ended growth cycle as more capacity comes on line. The company is also seeking expanded Provenge manufacturing approval. While the implied upside is 47% to the $52.73 target, shares have traded north of $57.00 this year. We recently saw a very bullish outlook from a research report here.
Incyte Corporation (NASDAQ: INCY) is expected to have some 25% upside to its $21.08 consensus target, and it should be noted that it has a 52-week high of only $17.48. Thomson Reuters expects a decline in 2011 revenues and the story is still one that can go either very well or could backfire as its losses mount. Incyte’s market cap is still north of $2 billion and its cash is in excess of $400 million as of its September 30, 2010 balance sheet. Keep in mind that at the time of that balance sheet, debt and deferred liabilities already offset that cash balance. Incyte is one that could be a huge wild card ahead.
Acorda Therapeutics, Inc. (NASDAQ: ACOR) is one that is close enough to the 52-week lows that the implied upside may not be believed by many investors. The implied upside to the $33.58 target is still over 21%, but shares have come off the yearly highs by more than 30% so far in 2010. Its market cap is barely over the $1 billion line at $1.08 billion and we’d rate this another wild card for biotech investors.
As far as how these big biotech targets compare with a fresh initiation from Credit Suisse, that can be seen here. Keep your eyes out for both Human Genome Sciences and Dendreon in 2011. Those are both exponential winners and were up for review in late 2010 as they were among the field of ten-baggers with implied gains of 1,000% or more.
JON C. OGG
Amgen Inc. (NASDAQ: AMGN) is running higher after reporting on Monday evening that denosumab did delay the spread of prostate cancer to bones. The study opens up the possibility for another blockbuster revenue stream for the drug and then some with annual sales possibilities of more than $1 billion.
Denosumab delayed the spread of prostate cancer by 4.2 months on average over the placebo group. The study did not find a survival benefit. The drug targets a RANK protein discovered by Amgen more than a decade ago, which works to break down old bone cells and replace them with new cells.
Amgen said it plans to review the study data and will then meet with regulators before deciding whether or not to seek approval for a prostate cancer indication.
The men in this last study were considered high risk for malignancies that could spread to bones with high PSA levels.
Amgen shares are up over 5% at $57.00 in early pre-market indications versus a 52-week trading range of $50.26 to $61.26.
Dendreon Corporation has PROVENGE for prostate cancer, although these are different agents. It appeared that Dendreon was trading higher but that was a perhaps a bad print in the pre-market no-man’s land trading.
JON C. OGG
Top BioHealth Analyst Upgrades & Downgrades (AMGN, AZN, BAY, BIIB, CELG, EXAM, GILD, GSK, HGSI, LH, NVS, PFE, UTHR, WCRX)
We have seen many research calls from Wall Street analysts with upgrades, downgrades, and initiations this Tuesday in the world of biotech, pharmaceuticals, and biohealth. Some of the key calls we have seen are as follows:
Amgen Inc. (NASDAQ: AMGN) Started as Neutral w/ $58 target at Credit Suisse.
AstraZeneca (NYSE: AZN) Cut to Underperform at Credit Suisse.
Bayer AG (NYSE: BAY) Raised to Outperform at Credit Suisse.
Biogen Idec Inc. (NASDAQ: BIIB) Started as Neutral w/ $68 target at Credit Suisse.
Celgene Corporation (NASDAQ: CELG) Started as Neutral w/ $60 target at Credit Suisse.
Celgene Corporation (NASDAQ: CELG) Maintained Buy with $68 price target at BofA/ML.
Examworks Group Inc. (NASDAQ: EXAM) Started as Outperform w/ $22 target at Credit Suisse.
Gilead Sciences Inc. (NASDAQ: GILD) Started as Outperform w/ $52 target at Credit Suisse.
GlaxoSmithKline plc (NYSE: GSK) Raised to Neutral at Credit Suisse.
Human Genome Sciences Inc. (NASDAQ: HGSI) Started as Outperform w/ $31 target at Credit Suisse.
Lab Corporation of America (NYSE: LH) Started as Neutral w/ $89 target at Credit Suisse.
Novartis (NYSE: NVS) Raised to Outperform at Credit Suisse.
Pfizer Inc. (NYSE: PFE) Maintained Outperform at Credit Suisse.
United Therapeutics Corp. (NASDAQ: UTHR) Started as Neutral w/ $57 target at Credit Suisse.
Warner Chilcott plc (NASDAQ: WCRX) Reiterated Buy at BofA/ML.
You can join our free daily email distribution list from 24/7 Wall St. to hear more about broader analyst upgrades and downgrades, top day trader and active trader alerts, news on Warren Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.
JON C. OGG
Things have changed in the last week. The mid-term elections took away the majority of the House of Representatives, and the Senate now no longer has the super-majority which could get laws passed no matter what they included. Now it seems that the tax cuts may be extended for another year or maybe two years, which could imply a permanent change ahead if the 2010 election trends remain close to the same in 2012. Quantitative easing from the FOMC is meant to drive investors into riskier assets and create a higher pricing environment to avoid deflationary pressure. Generally speaking, those riskier assets are commodities, and broader stocks tied to industrial, exports, financials, and more. But what about biotech and emerging pharma? So far, QE2, tax extension, and the reversal of ‘the new normal’ has not highlighted biotech in the slightest.
Biotech HOLDRs (NYSE: BBH) and SPDR S&P Biotech (NYSE: XBI) are classic examples of underperforming ETFs in the last week as you can see in the chart below. The Biotech HOLDRs actually fell during the rest of the market gains, while the SPDR S&P Biotech ETF significantly underperformed the PowerShares QQQ (NASDAQ: QQQQ).
A research call this last Thursday came from Goldman Sachs and it was cautious in Celgene Corporation (NASDAQ: CELG) and Gilead Sciences Inc. (NASDAQ: GILD); and the call was very cautious in Amgen Inc. (NASDAQ: AMGN) and Biogen Idec Inc. (NASDAQ: BIIB). Alexion Pharmaceuticals, Inc. (NASDAQ: ALXN) was the one that Goldman Sachs liked, and despite its large gains so far in 2010 the stock performed well after rising from about $68 early Tuesday to close the week out at $72.72.
MannKind Corp. (NASDAQ: MNKD) is one of those companies that will have nearly zero impact from Quantitative Easing nor from who is in control of the House, Senate, or White House. Alfred Mann’s inhalable insulin candidate took a hit because of fraud allegations from a terminated employee who brought up study misconduct concerns. Shares went from $6.20 on Thursday early morning to close the week out at $5.54 for roughly a 10% drop. The 52-week range is $4.76 to $11.12, and the general theme is that AFREZZA is farther and farther away from approval.
Human Genome Sciences Inc. (NASDAQ: HGSI) has lost some of its high-flyer status compared to 2009 and early 2010, and this week brought about a negative cloud on teh company even though the company itself was not at fault. The SEC charged a French research doctor with insider trading that allowed a hedge fund to dump 6 million shares after a tip that the drug Albuferon for Hepatitis C had negative test results. The problem is that the incident goes back to 2007. Human Genome shares were nearly at $27.00 at the start of the week and they closed at $25.31 versus a 52-week range of $20.56 to $34.49.
VIVUS Inc. (NASDAQ: VVUS) was started as Buy at Roth Capital this last week with a $12 price target, yet it did not hold much of the large gains from the week before. VIVUS shares rose a week earlier from $6.13 ti $7.75 after the FDA denied its Qnexa weight loss drug but after most issues seemed to be within working conditions without the need for a new round of drug trials. Shares did not close on the lows Friday, but the loss was close to 10% at $7.12 on the week. If this is approved, we have seen some research that indicates many patients will probably pay out of pocket on their own for this if insurance reimbursement rates do not cover it.
Dendreon Corporation (NASDAQ: DNDN) was another dud this week. The company’s loss was more than $79 million due to ongoing product expansion and promotion costs for PROVENGE. The drug is selling less than expected so far. The company sold $20.2 million and sales grew each month, but analysts were looking for nearly $24 million in sales. Dendreon gave sales projections of $46 to $47 million in 2010 revenue. It said it expects $350 to $400 million in revenue in 2011, but 2011 is expected to be very back-end loaded as capacity comes on line. That implies that any delay will push revenues further and further out, perhaps as more prostate cancer competition can come on the market. Analyst expectations were more like $62.6 million in 2010 and over $400 million in 2011. Shares peaked at $39.00 during the week but closed down at $35.07; its 52-week range is $25.05 to $57.67.
Most investors consider biotech and emerging pharma to be risk-based assets. These are a different sort of risk. Some of the pressure from Washington D.C. may abate, but Republicans have vowed to address some of the cost side of the equation when it comes to healthcare. If Washington can figure a way for hospitals to not charge $25 for administering an aspirin tablet or an ibuprofen pill, it seems logical that $20,000 to $90,000 treatment regimens could remain under scrutiny.
So far, biotech and emerging pharma is being discounted entirely despite the winds of change feeling a tad less abrasive.
JON C. OGG
Goldman Sachs is taking a very cautious view on many of the large biotech leaders in a new coverage call. While there is a silver lining call in one, the bulk of the research has a very cautious stance due to revenue woes that could lie ahead for the large biotechs.
Amgen Inc. (NASDAQ: AMGN) started with a “SELL” rating.
Biogen Idec Inc. (NASDAQ: BIIB) started with a “SELL” rating.
Celgene Corporation (NASDAQ: CELG) started with a “NEUTRAL” rating.
Gilead Sciences Inc. (NASDAQ: GILD) started with a “NEUTRAL” rating.
Alexion Pharmaceuticals, Inc. (NASDAQ: ALXN) is the standout stock this morning and the exception to the rule. Alexion shares were started on the CONVICTION BUY LIST and the stock is up 2% at $71.94 and close to challenging the 52-week high of $72.45.
JON C. OGG