With earnings just around the corner, one key analyst is taking the opportunity to share its thoughts on select mid-cap and large-cap biotech companies. Despite a modest erosion to fundamentals and sector headwinds, Jefferies does not anticipate any dramatic earnings misses, which could help sentiment continue to turn around. Although this sentiment may be positive going into earnings, price targets were still cut for some companies.

Jefferies gave its take on the first quarter as follows:

Fundamentals have eroded modestly for the mid/large cap names over the past few months, ranging from increasing IP conflicts (Tecfidera, Harvoni/Sovaldi, Abraxane, Praluent), pricing scrutiny (Orkambi, Harvoni/Sovaldi, Medicare Part B), and slowing launches (Otezla), leading us to lower our price targets for several companies. Nonetheless, despite this, and typical 1Q seasonal softness across therapeutics we expect to recur in the first quarter, with a low likelihood for any unexpected dramatic misses based on our analyses, and increased recognition that the group has been oversold, sentiment could continue its turnaround – boosted if M&A chatter continues.

Biogen

After a strong fourth quarter, Jefferies expects a more inline first quarter for Biogen Inc. (NASDAQ: BIIB), with multiple sclerosis franchise sales slightly mixed and hemophilia slightly above consensus. With limited evidence of Tecfidera Rx growth from the DTC yet, increasing IP risk, and no news yet on the key BAN2401 trial interim, the high-risk but high-reward LINGO data catalyst could increase in prominence. Jefferies still believes Biogen’s valuation already bakes in known long-term challenges to the existing portfolio and does not fully reflect the probability-weighted upside potential from their pipeline.

Shares of Biogen were trading at $268.74 on Wednesday morning, with a consensus analyst price target of $349.89 and a 52-week trading range of $242.07 to $432.88. Jefferies has a Buy rating but lowered its price target to $325.

Celgene

The first quarter is seasonally soft for Celgene Corp.’s (NASDAQ: CELG) Revlimid, and while Jefferies doesn’t expect anything different for the first quarter, realistic expectations should enable an overall inline quarter. Otezla scripts slowing is a bit disappointing, increasing the dependence on ex-U.S. uptake and additional indications for continued major sales growth. Formalization of 2017 guidance, possibly on the first quarter earnings call, balancing strong franchise trends against foreign exchange headwinds and softening Abraxane/Otezla should reduce uncertainty and confusion.

Shares of Celgene were last seen trading at $104.31. The consensus price target is $137.95, and the 52-week range is $92.98 to $140.72. Jefferies has a Buy rating but lowered its price target to $131.

Gilead Sciences

Assuming a rebound in VA purchasing and continued solid international sales, Harvoni and Sovaldi appear poised to meet or beat expectations (Harvoni estimated $3.35 billion versus $3.26 billion consensus, Sovaldi estimated $1.52 billion versus $1.36 billion consensus), along with expectations for a significant Genvoya beat based on strong prescription trends and aggressive share buybacks. Jefferies could see Gilead Sciences Inc. (NASDAQ: GILD) shares uptick on the quarter, especially given the discounted multiple, though longer term the firm still believes greater certainty around sustainability of hepatitis C virus patient flows and pricing and pipeline prospects will be needed to catalyze more meaningful stock upside.

Shares of Gilead were trading at $96.54, with a consensus price target of $114.60 and a 52-week range of $81.89 to $123.37. Jefferies has a Hold rating but raised its price target to $101.

Incyte

Jefferies expects Jakafi sales approaching consensus, accounting for seasonally weak gross/net. Focus is likely to remain, though, on quantifying the contribution of potential long-term value drivers, which should be more clear in the second half of 2016 — baricitinib partner Eli Lilly’s launch prep and aggressiveness pursuing potentially large additional indications, clarity on epacadostat’s potential activity and go-forward development plans given evolving standard of care, and balancing benefits of pipeline breadth/combinability with expense control given crowded cancer competitive landscape.

Shares of Incyte Corp. (NASDAQ: INCY) were trading at $75.03, within a 52-week trading range of $55.00 to $133.62. The consensus price target is $90.64. Jefferies has a Buy rating but lowered its price target to $88.

Vertex Pharmaceuticals

All eyes are on Vertex Pharmaceuticals Inc.’s (NASDAQ: VRTX) Orkambi launch. Jefferies estimate remains at $253 million, versus the $264 million consensus, for the first quarter. It is unclear if the company will have enough data points on persistence and compliance and side effect management to provide full-year U.S. sales guidance, though the firm expects it would be conservative anyway. Even if there were a potential miss for the quarter, any potential clarity on full-year expectations, confidence in European Union reimbursement processes, given Street CF numbers that are finally coming down and increasing recognition of a long-term stock upside/downside that looks highly attractive.

Shares of Vertex were trading at $86.45, with a consensus analyst target of $126.50. The 52-week trading range is $75.90 to $143.45. Jefferies has a Buy rating but lowered its price target to $108.

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