One group that was absolutely buried during the sell-off was the biotechs. In fact, since the highs printed in July of last summer, the IBB index that tracks the industry is still down a stunning 35%, despite the fact that many of the large cap biotech leaders trade at multiples that look as cheap as the big pharmaceuticals but have much faster growth rates.
A new Jefferies research report that lists top growth stocks to buy for this week is dominated by biotech companies. While these are some of the top stocks in the industry, they still only remain suitable for very aggressive accounts that can sustain big movements in principal, as often these companies are dependent on binary data. We focused on three that could have positive upcoming data presented.
Anacor Pharmaceuticals
This company has been hit hard as upheavals in the specialty pharmaceutical area have proved damaging to all. Anacor Pharmaceuticals Inc. (NASDAQ: ANAC) is a biopharmaceutical company focused on discovering, developing and commercializing novel small-molecule therapeutics derived from its boron chemistry platform.
Anacor’s first approved drug, Kerydin (tavaborole) topical solution 5%, is an oxaborole antifungal approved by the U.S. Food and Drug Administration (FDA) in July 2014 for the topical treatment of onychomycosis of the toenails. In July 2014, Anacor entered into an exclusive agreement with Sandoz, a Novartis company, pursuant to which PharmaDerm, the branded dermatology division of Sandoz, distributes and commercializes Kerydin in the United States.
Jefferies notes that the company reported lower than expected earnings last week as the Kerydin numbers came in lower than expected, but Crisaborole, an investigational non-steroidal topical PDE-4 inhibitor for the potential treatment of mild-to-moderate atopic dermatitis and psoriasis, is still the big story at the company, which the analysts expect FDA approval for in 2017.
The Jefferies price target for the stock is $105, and the Thomson/First Call consensus target is $143.33. The stock closed most recently at $60.07.
BioMarin Pharmaceuticals
This is one of Wall Street’s favorites and the earnings announced recently were outstanding. BioMarin Pharmaceuticals Inc. (NASDAQ: BMRN) develops and commercializes innovative biopharmaceuticals for serious diseases and medical conditions. The company’s product portfolio includes five approved products and multiple clinical and preclinical product candidates.
Over the past decade, BioMarin has become one of the top orphan drug companies, and it looks poised to stay there. It is expected to post around $875 million in revenue this year and possibly around $1.1 billion next year, following the approval of Vimizim, an enzyme replacement therapy for Morquio syndrome. BioMarin had raised its guidance for Vimizim to $200 million to $220 million from $170 million to $200 million.
The Jefferies analysts are positive on the PEG-PAL Phase 3 data, which should be released soon. They also expect the full results to be released next month at the Society for Metabolic Disorders conference.
Jefferies has a $120 price target. The consensus target is $118.89, and the stock closed on Monday at $88.22.
Kite Pharma
Kite Pharma Inc. (NASDAQ: KITE) had a successful 2014 IPO and is a clinical-stage biopharmaceutical company engaged in the development of novel cancer immunotherapy products, with a primary focus on engineered autologous cell therapy (eACT) designed to restore the immune system’s ability to recognize and eradicate tumors.
Jefferies recently met with management and expects the company to provide an update on the duration of response from pilot ZUMA-1 at upcoming conferences. The firm also thinks that any positive read outs could prove to be catalysts for the shares.
The $75 Jefferies price target is less than the consensus target of 78.55. The stock closed on Monday at $53.60.
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With biotech stocks still way out of favor, investors need to be cautious, but with that in mind, the opportunities now could be some of the biggest in years, and the upside for aggressive accounts could be tremendous.
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