Health and Healthcare

SunTrust Robinson Humphrey Starts Coverage on 5 Top Biotech Stocks

The firms we cover on Wall Street are sometimes like covering the major sports teams. Analysts are like the top players and tend to move around as their career strengths shift or grow. This is very common, and often top analysts can be at three of four firms during a long Wall Street career.

Well regarded biotech analyst Salveen Richter recently joined the team at SunTrust Robinson Humphrey after stints at Jefferies and Canaccord. He opens up coverage of the biotech sector with four top stocks to buy and one Neutral-rated stock. The analyst focuses on companies in which pricing power, mergers and acquisitions, product innovation and secular demand are at the forefront of the stock and the story.

Here are the four top biotech names initiated at a rating of Buy and one at Neutral at SunTrust Robinson Humphrey.

Alexion Pharmaceuticals Inc. (NASDAQ: ALXN) is the top large-cap new pick at SunTrust, and many on Wall Street believe the stock is a potential acquisition target. The analysts are positive on the Soliris label expansion and the ongoing transition from a one-drug company to a two- to three-drug firm. As a key ultra-orphan drug play, the analyst see solid execution and substantial operating leverage at the company.

The SunTrust price target for the stock is set at a Wall Street high of $229. The Thomson/First Call estimate is posted at $198.65. Alexion closed Friday at $165.30 a share.

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bluebird bio Inc. (NASDAQ: BLUE) may be a less well-known stock to investors, but the stock is the top small-cap pick at SunTrust. The analyst sees the company as an emerging biotech player focusing on gene therapy, and SunTrust is also focused on the upside of the stock from clinical updates from the key LentiGlobin trials due by the end of this year.

The SunTrust Robinson Humphrey price target is $57. The consensus is posted at $53.25. Shares of bluebird bio closed Friday at $38.44

Celgene Corp. (NASDAQ: CELG) is a mega-cap name to buy at SunTrust. The big biotech presented results this summer from an analysis that showed encouraging news for blockbuster drug Revlimid as a treatment for multiple myeloma. A combination of Revlimid and low-dose dexamethasone significantly improved overall survival and progression-free survival rates, leading some experts to conclude that the treatment probably now will become the new standard of care for the disease.

The SunTrust team also sees Celgene working to diversify away from the flagship product through the emerging inflammation and immunology franchise, and a rich pipeline of alliances. The SunTrust analyst has a $121 price target. The consensus target is $102.36. The stock closed on Friday at $93.79.

Incyte Corp. (NASDAQ: INCY) is another Buy-rated stock that could be in the sights of a larger company. In addition to the company’s current validated approach in hematology-oncology, there is reason to believe the three wholly owned clinical-stage assets could drive several billions in revenue, something important for an acquiring company looking to add assets.

The SunTrust team is also bullish on Incyte’s rich pipeline of small molecule therapies in all stages of development. They start the stock with a $71 price target, and the consensus target is set at $75.50. The stock closed Friday at $51.83.

Pharmacyclics Inc. (NASDAQ: PCYC) is rated Neutral at SunTrust and wraps up the initiations at the firm. The company recently announced that the FDA will review its supplemental New Drug Application, seeking full approval of Imbruvica for treating patients with chronic lymphocytic leukemia and small lymphocytic lymphoma who have been treated at least once before for the disease, on a priority basis. A decision is expected perhaps as early as next month.

SunTrust thinks Pharmacyclics’ 2014 earnings are on track, but the analyst is less positive on next year. The price target is $140, while the consensus target is a sky-high $160.19. The stock closed Friday at $118.88.

The SunTrust Robinson Humphrey stock selection are an eclectic array of top names and smaller fast-growing stocks on the rise. It is important to remember that investing in biotech is only suitable for accounts with a very high risk profile.

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