The end of 2015 and the start of 2016 have been hard on biotech, and in some cases have been hard for Big Pharma. It turns out that there is not just one smoking gun, but the bears now seem to have ample power over cowering bulls. For starters, investors in 2016 are now value conscious and are selling rallies rather than buying dips. It is also an election year, and drug pricing policies are in the hot seat as Republicans and Democrats alike seem eager to go after drug companies and how they price their new drugs. Even the pricing of existing drugs is on the table.

All this makes for volatile times. If a drug company or biotech company doesn’t have a dividend and a stock buyback plan, analysts and investors seem to only be willing to pay lower multiples for earnings valuations. After all, having no revenues now and being valued at 40 to 60 times expected 2021 earnings is understandably a harder sell now that biotechs are not endlessly rallying.

24/7 Wall St. has had its eyes out for a while now on the biotech and pharmaceutical sector for potential bottoming out. The first thing readers need to consider is that calling a true bottom at any given time has proven over and over to be a cross between a fool’s errand and a sucker’s game. That being said, there is no reason to say that a bottom has been seen this week, this month or ever. Still, long-term investors try to look beyond the noise of today for opportunities in the months or longer ahead.

It turns out that analysts have started getting much more realistic on how high certain pharma and biotech stocks should be valued. Many of these are down massively from their highs. The biotech ETF (XBI) is now down about 50% from its 2015 peak and has fallen under a key upside support line from 2014. Some key analyst calls have been made in the biotech and pharmaceutical sectors over the past week or so. These need to be considered long-term picks, and it cannot be stressed enough that if the market keeps drifting lower that these would seemingly follow suit.

Last week there were four top biopharma movers too big to be ignored. Here are six biotech and pharma stocks that analysts are telling their firm’s clients to buy now for solid upside opportunities ahead. As you will see, there are even some lowered price targets here that still offer large potential upside for long-term value investors.

ACADIA Pharmaceuticals

ACADIA Pharmaceuticals Inc. (NASDAQ: ACAD) was started as Buy with a $40 price objective (versus a $19.36 prior close) at Bank of America Merrill Lynch on February 8. This of course stands out because it was 100% in implied upside. Maybe a double-your-money target seems crazy, but now consider that Acadia’s 52-week range is $16.64 to $51.99 and it has a $2 billion market cap.

To show a counterbalance for such strong upside, it turns out that S&P Capital IQ has almost as much conviction — but the opposite view with a Strong Sell rating due to valuation. Be advised that ACADIA has an FDA review for Nuplzaid as a drug to treat psychosis due in late March and that the short interest was very high at almost 15 million shares short on last look.

Gilead Sciences

Gilead Sciences Inc. (NASDAQ: GILD) has been under fire of late and previously for how it prices its drugs for hepatitis C and HIV, with U.S. prices often being exponentially higher than in other countries. Still, it is a best-in-show for the quality of its drugs, effectively offering a cure for hep-C. This past week Gilead was started with an Outperform rating and was assigned a price target of $120 (versus a prior $87.80 close) for a 12 to 18 month outlook.

Gilead had a consensus analyst price target of $118.63 at the time but closed at $89.44 on Friday, with a consensus analyst target of $116.68. Gilead also has a 52-week trading range of $81.89 to $123.37. Oppenheimer commented on robust cash flows and a longer than expected HIV revenue trail, and its target is based on Gilead’s base business alone with more potential upside from M&A hopes. The prior weekend’s edition of Barron’s also noted that Gilead could have 30% upside over the next year as it diversifies internally and via likely acquisitions.
La Jolla Pharmaceutical

La Jolla Pharmaceutical Co. (NASDAQ: LJPC) was started as Outperform with a $40 price target at Cowen on February 9. Its prior close was $13.58, and shares ended Friday at $15.09. A call to more than double, or nearly triple, seems high, but the 52-week range here is $12.68 to $44.99 and the consensus analyst target is roughly $47.50, despite a mere $275 million market cap.

The driving force is the LJPC-501 drug candidate as a regulator of blood pressure (for the treatment of catecholamine-resistant hypotension, or low blood pressure) with blockbuster potential after 2021.

Pfizer

Pfizer Inc. (NYSE: PFE) got a big nod from Merrill Lynch this past week. It could even have been viewed as a multi-upgrade as its “with or without” verbiage included. Merrill Lynch already rated Pfizer as Buy with a $39.00 price objective, but the firm added it to the prized US 1 List and even called it the new top pick for 2016. This research report said that Pfizer’s current valuation is an attractive entry point, with roughly 37% upside as a standalone entity, or 51% upside with Allergan.

Pfizer closed out the week at $29.36, with a 52-week range of $28.25 to $36.46, a consensus price target of $39.40, a yield north of 4% and a market cap of $181 billion. As a reminder, Pfizer is in the hot seat for trying to invert to Ireland via the Allergan acquisition. Could that jeopardize its status as a Dow Jones Industrial Average stock?

Shire

Shire PLC (NASDAQ: SHPG) reported earnings last week, with $6.1 billion in product sales, and sees 7% to 10% 2016 in non-GAAP diluted EPS growth. Its American depositary shares (ADSs) actually closed up almost 6% at $159.90 on Friday as a result, after a $151.00 prior close. Shire saw several analyst calls. It was raised to Outperform from Sector Perform at RBC Capital Markets.

Jefferies maintained its Buy rating on Shire but cut its price target to $223 from $259. BTIG maintained its Buy rating but lowered its price target to $230 from $275, and Susquehanna maintained its Buy rating but lowered its target to $220 from $280. Many positive reviews remain ahead of the Baxalta deal, and Shire has a 52-week range of $147.60 to $270.63.

Teva Pharmaceutical

Teva Pharmaceutical Industries Ltd. (NYSE: TEVA) had 2015 adjusted sales of $19.652 billion, and the company said that 2016 would be the year it closed and integrates the Actavis Generics, Rimsa and Takeda BV deals. Guidance may have seemed a tad light for the first quarter, and 2016 guidance will be given when Actavis closes (in April or so). Still, shares rose 3% to $55.75 against a 52-week range of $53.79 to $72.31. Jefferies maintained its Buy rating but cut its target to $72 from $77. Goldman Sachs kept its Buy rating but cut its target price to $70 from $75, and Mizuho maintained its Buy rating and cut its target price to $78 from $79.

Leerink was less positive on Teva, with an Outperform rating as it lowered the price target to $68 from $75. Oppenheimer was more positive by reiterating Teva as Outperform and with a $77 price target. Teva was also one of our own 10 stocks to own for the next decade.

You can follow @Jonogg if you want to receive our daily analyst upgrades and downgrades and other key market and research calls directly on your Twitter feed.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.