After two years of dominant performance in 2012 and 2013, the biotech rally hit a wall in late February, and the top stocks got absolutely hammered. Immediately, the bears jumped on the wounded sector leaders, saying they were way overvalued. Bulls argued, especially after the stocks were quickly eviscerated up to 20% and more, that forward earnings had them cheaper than some large pharmaceutical stocks, with much bigger growth potential.
A new research note from Credit Suisse maintains that the top large cap biotech leaders are leading the comeback rally from the hard sell-off. Plus, the analysts cite certain top names as not exactly having acquired, but are close to what they term, “domain domination.” Here are the top large cap biotech stocks to buy rated Outperform at Credit Suisse.
Biogen Idec Inc. (NASDAQ: BIIB) is one of top stocks to buy at Credit Suisse and on Wall Street. The company is one of those that Credit Suisse sees close to domain domination status. Many predict that Biogen’s Tysabri earnings will have a meaningful jump this year and beyond. Wall Street analysts also expect the company to reiterate guidance for anti-LINGO data in acute optic neuritis in the second half of this year, which provides the highest level of potential upside to Biogen’s share price if the results are positive. Investors can also look forward to a Prescription Drug User Fee Act (PDUFA) announcement on June 20 for the company’s hemophilia factor 8 Eloctate. The Credit Suisse price target for the biotech giant is at $400. The Thomson/First Call consensus figure is at $348.70. Biogen closed Friday at $317.55 a share.
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Celgene Corp. (NASDAQ: CELG) is probably the most prominent name of the companies we cover looking for a pancreatic cancer cure, and another stock Credit Suisse calls on the path to domain domination. For investors, it also may represent the best idea from a risk tolerance standpoint, as it has a strong product lineup and a stellar pipeline. Wall Street reports that physicians are very positive on Abraxane in combination with gemcitabine as new standard of care in first line patient treatment. They are also confident adding Abraxane improves outcomes. With very solid reimbursement levels for patients, most physicians haven’t considered an alternative, which would be generic paclitaxel. Wall Street analysts think that current use is about 35% of first line treatments, and they believe in three to five years that number could rise to 50% to 60% share. The Credit Suisse price target for this biotech powerhouse rated Outperform is $210, and the consensus estimate is pegged at $191.23. Celgene closed Friday at $161.31.
Gilead Sciences Inc. (NASDAQ: GILD) is another top stock that was crushed in the biotech sell-off but posted solid first-quarter earnings and has rallied back. The company has shown excellent efficacy in chronic lymphocytic leukemia and indolent non-Hodgkin’s lymphoma with their top drug idelalisib, which is an oral inhibitor. The company presented very encouraging data at the recent ASCO conference on updated Phase 3 idelalisib+R data and new PFS/duration curves. Idelalisib is under priority review for this indication with a response expected by August 6. The Credit Suisse price target for the stock is $110, and the consensus price target for the stock stands at $100.57. Gilead closed Friday at $82.39.
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Medivation Inc. (NASDAQ: MDVN) has a top prostate cancer drug that would be a valuable acquisition, and it is another top name rated Outperform at Credit Suisse. Xtandi is a highly leverageable, likely blockbuster product in prostate cancer, a very large market segment with potential upside in breast cancer. The company’s partnership with Astellas suggests a natural buyer, but some on Wall Street think that third parties would also be interested in buying this top biotech name. The Credit Suisse price target for the stock is $95, and the consensus target is $93.47. Medivation closed Friday at $75.46.
Pharmacyclics Inc. (NASDAQ: PCYC) operates as a clinical-stage biopharmaceutical company focusing on developing and commercializing small molecule drugs for cancer treatment. The company’s drug Imbruvica, introduced this year for chronic lymphocytic leukemia, helped patients live longer without their disease worsening than other competing therapies. Wall Street analysts are expecting this month data on the company’s Phase 3 Resonate data and investor interpretation of efficacy and PFS and duration/persistence on therapy. The Credit Suisse price target for the stock is posted at $121, and the consensus price target is much higher at $149.13. The stocks closed Friday at $93.50.
Regeneron Pharmaceuticals Inc. (NASDAQ: REGN) has been a performance monster over the past two years, and most Wall Street firms expect it to stay one. With treatments for everything from macular degeneration to colorectal cancer, the company continues to exploit an extraordinary pipeline. The company is viewed by many Wall Street firms as a leading candidate to be one the next generation biotech large cap leaders. The Credit Suisse price target for the stock is $340, and the consensus price target is posted at $345.83. Regeneron closed Friday at $311.21.
The halcyon days of 2012 and 2013, when everything went right for biotech investors, may be gone for quite a while. However, buying the top names, with incredible products and pipelines, still makes good sense for investors with a higher risk tolerance. Buying these large cap leaders may provide the best upside with the least downside risk.
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