Health care is a sector that has been good to investors so far this year, and some of the top pharmaceutical and biotech companies have posted outstanding results. While there is always the specter of clinical results and outcomes hanging over these top companies, investors that place their bets on stocks that have the potential for positive catalysts are offered a far better chance of success.
A series of new reports from Jefferies focus on some of the top stocks in the pharmaceutical and biotech arenas. Almost all these stocks have data that could send shares measurably higher, and all make good sense for accounts looking for potential alpha candidates to add to portfolios. All four are rated Buy.
Bristol-Myers Squibb
This top company remains a Wall Street favorite and it posted solid first-quarter results. Bristol-Myers Squibb Co. (NYSE: BMY) is a global pharmaceutical company focused on discovering, developing, licensing and marketing chemically synthesized drugs or small molecules and biologics in various therapeutic areas, including virology comprising human immunodeficiency virus infection (HIV), oncology, neuroscience, immunoscience and cardiovascular.
The company recently announced that Biogen will pay $300 million upfront to Bristol-Myers to license a palsy drug with a $2 billion market opportunity and the potential to use that to treat Alzheimer’s. The company will pay a total of $410 million in milestone payments and a tiered double-digit royalty to license a drug known only as BMS-986168. The drug just completed Phase 1 testing in progressive supranuclear palsy.
The Jefferies report noted :
Shares saw pressure earlier last week on the back of updated data from Merck’s Keytruda combo at ASCO. We look forward to efficacy data for the company’s IDO inhibitor at SITC in November. Though competition remains high, we continue to like the risk/reward setup for Bristol-Myers, especially as we believe a potential takeout by a larger player would limit downside risk in the event Opdivo/Yervoy disappoints.
Shareholders receive a 2.9% dividend. The Jefferies price target for the stock is $64, and the Wall Street consensus price objective is $57.18. Shares closed trading Friday at $53.75.
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AveXis
This stock has been on a roll and could hold big upside potential. AveXis Inc. (NASDAQ: AVXS) went public in February of 2016 and is a clinical-stage gene therapy company that develops and commercializes novel treatments for patients suffering from rare and life-threatening neurological genetic diseases. Its initial product candidate is AVXS-101, a gene therapy product candidate that is in clinical trials for the treatment of spinal muscular atrophy Type 1.
The company also intends to identify, acquire, develop and commercialize gene therapy product candidates for the treatment of other rare and life-threatening neurological genetic diseases. It has strategic collaboration and license agreements with Nationwide Children’s Hospital, The Research Institute at Nationwide Children’s Hospital, REGENXBIO and Asklepios Biopharmaceutical.
The analysts noted:
We hosted a dinner with management following their presentation at the Health Care conference. Management focused on how it is continuing to advance its ability to manufacture AVXS-101 and prepare for the start of the pivotal trial and pilot Type 2 trial. The end of Phase meeting is still expected in second or third quarter of this year.
Jefferies has a $92 price target. The consensus target is $88.94 and shares closed Friday at $78.27.
Kite Pharma
This top company has consolidated a big move higher back in March, and it may be poised for a further leg up. Kite Pharma Inc. (NASDAQ: KITE) is a clinical-stage biopharmaceutical company that is focused on the development and commercialization of cancer immunotherapy products to target and kill cancer cells. It offers engineered autologous cell therapy, which is an approach to the treatment of cancer.
Kite’s therapy involves modifying a patient’s T cells outside the patient’s body, or ex vivo, causing those cells to express chimeric antigen receptors, or T cell receptors, and then reinfusing the engineered T cells back into the patient. The Jefferies report noted:
We hosted the CEO at our Healthcare Conference last week and had the opportunity to discuss data from the ICML abstract for Novan Inc., as well as other ASCO data. The JULIET data from Novan showed comparable to KITE’s ZUMA-1 study, but KITE management noted they see a competitive advantage from their superior manufacturing operation
The $101 Jefferies price target is well above the consensus target of $85.83. The shares ended last week at $87.79.
Nxstage Medical
This stock was crushed back in May and could be offering investors are very opportunistic entry point. Nxstage Medical Inc. (NASDAQ: NXTM) is a medical technology company that develops, manufactures and markets products and services for patients suffering from chronic or acute kidney failure. It operates through three segments.
Its System One segment includes revenues from the sale and rental of the System One and PureFlow SL dialysate preparation equipment and the sale of disposable products in the home and critical care markets. The In-Center segment includes revenues from the sale of blood tubing sets and needles for hemodialysis, primarily for the treatment of end-stage renal disease patients at dialysis clinics, and needles for apheresis. It markets extracorporeal disposable products under the Medisystems brand. The Services segment includes revenues from dialysis services provided to patients at its NxStage.
The analysts noted:
We hosted management at last week’s Jefferies Healthcare Conference. Following management’s pushout of the peritoneal dialysis (PD) product during the first quarter our conversations centered around that launch. Even a small amount of success in the PD market would be significant. We believe fears around this are overblown and shares remain undervalued.
The Jefferies price target is $33. The posted consensus target is $28.44, and shares closed Friday at $22.79.
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These four stocks to buy have solid upside potential. More conservative accounts should stay with the big pharmaceutical stock, while aggressive accounts may be more inclined to look at the other three.
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