How the Top Biotechs Handled the Valuation Shock

Part of the dialogue of how stocks within this sector should be priced and valued came on behalf of presidential candidate Hillary Clinton. She sent out a tweet calling attention to a New York Times article showing that the cost of a 62-year old drug was being raised by over 5,000%, to $750.00 per pill from $13.50.

Along with this stance, she laid out a plan for a how she believes health care should be approached.

The New York Times wrote over the weekend that Daraprim, a drug to treat a life-threatening parasitic infection, was acquired in August by Turing Pharma. It turns out that Turing is a start-up run by a former hedge fund manager, and the firm then immediately raised the price to $750 per pill from a prior price of $13.50. Suddenly the cost of treatment for some patients rose into the hundreds of thousands of dollars.

While 24/7 Wall St. is not taking either side in terms of the political debate, we do recognize that this new point of view in the valuation discussion may be disruptive at first, but in the long run could lead to increased transparency.

Most investors in biotech favor pricing power, so it goes without saying that sometimes “too much” really can be too much.

ALSO READ: 3 Top Jefferies Biotech Picks to Buy on Recent Sector Weakness

24/7 Wall St. has taken a look at some of the largest biotech companies and highlighted the damage that this single tweet did to them on Monday. We also included a recent trading history, consensus target and 52-week range.

Amgen Inc. (NASDAQ: AMGN) deals with human therapeutics worldwide. It focuses on the treatment of illness in the areas of oncology, hematology, inflammation, bone health, nephrology, cardiovascular and general medicine. On Monday, shares dropped a total of 2.3% on the day from the previous close of $150.59. Shares closed Friday at $138.60, in its 52-week trading range of $127.67 to $181.81. The stock has a consensus analyst price target of $186.15. The company has a market cap of $105 billion.

Biogen Inc. (NASDAQ: BIIB) develops and sells therapies for the treatment of neurological, autoimmune and hematologic disorders in the United States and internationally. On Monday, shares dropped a total of 5.6% from the previous close of $314.67. Shares closed Friday at $284.79. The stock has a consensus price target of $384.47 and a 52-week range of $265.00 to $480.18. The company’s market cap is $67 billion.

Celgene Corp. (NASDAQ: CELG) develops and commercializes therapies to treat cancer and inflammatory diseases in the United States and internationally. On Monday, shares dropped a total of 2.8% from the $122.62 previous close. Shares of Celgene closed Friday at $108.45, below its consensus price target of $149.59. The 52-week trading range is $83.16 to $140.72. The market cap is roughly nearly $86 billion.

Gilead Sciences Inc. (NASDAQ: GILD) develops and commercializes medicines in areas of unmet medical need. Its top drugs are hepatitis C vaccines, Solvaldi and Harvoni. On Monday, shares dropped a total of 2.5% on the day from the previous close of $108.44. Shares ended Friday at $100.14, in its 52-week range of $85.95 to $123.37. The consensus price target is $125.06 and the market cap is $147 billion.

ALSO READ: Merrill Lynch Has 4 Pharma Stocks to Buy Against Political Chatter

Alexion Pharmaceuticals Inc. (NASDAQ: ALXN) develops and sells therapeutic products, such as Soliris (eculizumab), a therapeutic product to treat paroxysmal nocturnal hemoglobinuria, a genetic blood disorder. On Monday, shares dropped a total of 3.6% from the previous close of $166.58. Shares ended the week at $149.25. The consensus price target is $223.88. The 52-week range is $147.46 to $208.88. The market cap is nearly $34 billion.