There are two events in the biotech world that can quickly bring down the price of a stock. One is to have a failed or, sometimes worse, a misunderstood clinical or a bad judgement from the U.S. Food and Drug Administration (FDA). Another is to have a drug company send out what is called a “Dear Healthcare Provider” letter. Both of these events happened recently, and one analyst says any prevailing weakness in the stocks needs to be bought now.

In two new research notes, Deutsche Bank’s formidable and well-regarded biotech analyst Robyn Karnauskas says that investors have misread the current instances floating around two leading biotech stocks, and they both should be bought now on any continuing weakness. The two that she is pounding the table on are Gilead Sciences Inc. (NASDAQ: GILD) and Vertex Pharmaceuticals Inc. (NASDAQ: VRTX).

Gilead Sciences

Gilead Sciences got hit hard on Monday after the pharmaceutical company warned of a potentially fatal complication for patients being treated with its hepatitis C drugs Harvoni or Sovaldi. Gilead sent an email to health care service providers, warning them that it had witnessed nine cases of treating patients with Harvoni or Sovaldi while also taking Amiodarone that resulted in irregular heartbeats and one case that resulted in death.

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The Deutsche Bank team points out that they spoke to Gilead management regarding the letter and came away from the discussions feeling that Amiodarone, which is manufactured by Sanofi and is an old cardio-vascular drug used to treat cardiac dysrhythmia, is rarely used in the United States, as better and safer alternative drugs exist. The majority of the cases that prompted the letter were reported in France, where physician loyalty is considered high, which Deutsche Bank feels may have contributed to the use of Amiodarone.

The bottom line? Buy on weakness.

The Deutsche Bank price target for the stock is $125. The Thomson/First Call consensus price target is set at $119.08. The stock closed Tuesday at $101.41 a share.

Vertex Pharmaceuticals

Vertex Pharmaceuticals also got shot Monday when it released results from a trial of one of its cystic fibrosis treatments. The Deutsche Bank view is that further testing may still prove the drug’s ultimate viability and worth. Karnauskas also pointed out in the research note that the data from the trial was statistically significant versus the placebo, and it was in line with prior Phase 2 results. In addition, the study of Vertex’s VX-661 drug in combination with ivacaftor in 39 adults met its primary safety end point.

Vertex said in its summarized press release:

Consistent with prior Phase 2 studies that evaluated 4 weeks of treatment with VX-661 in combination with ivacaftor, this study showed a rapid improvement in lung function within four weeks of treatment, and after patients completed treatment, lung function returned to baseline.

The lung function improvement reading of 4.4% after four weeks of treatment and 3.0% after 12 weeks was lower than some investors and other Wall Street analysts had been looking for.

With consistent data and a very positive safety profile, the Deutsche Bank view is once again to buy the weakness. With Vertex feeling that the data is supportive to the ongoing Phase 3 program, this makes sense for a company with a solid track record and expectations for a gigantic 2016.

The Deutsche Bank price target for the stock is posted at $155. The consensus number is much lower at $134.67. The stock closed Tuesday at $124.33.

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Robyn Karnauskas is one of the top biotech minds on Wall Street and has been for years. She is very well respected and has made some amazing calls in the past. She would not be advising a “buy the weakness” stance if there wasn’t a very good chance the advice was warranted.

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