The flurry of earnings starts this week, and depending on who you listen to, the numbers are either going to be fine or they will be disappointing. One thing is for sure, biotech, which is down big this year, with the iShares Nasdaq Biotech Index (IBB) still down almost 20%, looks to be fighting its way back, and many of the top companies in the sector will be reporting in April.

A new Jefferies research report highlights their top growth picks for this week, and the list is dominated by top biotech stocks. While only suitable for very aggressive accounts, they could have some tremendous upside, especially if binary event catalysts play out. All are rated Buy at Jefferies.

Anacor Pharmaceuticals

This company has been hit hard as upheavals in the specialty pharmaceutical area have proved damaging to all. Anacor Pharmaceuticals Inc. (NASDAQ: ANAC) is a biopharmaceutical company focused on discovering, developing and commercializing novel small-molecule therapeutics derived from its boron chemistry platform.

Anacor’s first approved drug, Kerydin (tavaborole) topical solution, 5%, is an oxaborole antifungal approved by the U.S. Food and Drug Administration (FDA) in July 2014 for the topical treatment of onychomycosis of the toenails. In July 2014, Anacor entered into an exclusive agreement with Sandoz, a Novartis company, pursuant to which PharmaDerm, the branded dermatology division of Sandoz, distributes and commercializes Kerydin in the United States.

Jefferies notes that the company reported lower than expected earnings as the Kerydin numbers disappointed, but the firm notes that Crisaborole, an investigational non-steroidal topical PDE-4 inhibitor for the potential treatment of mild-to-moderate atopic dermatitis and psoriasis, is still the big story at the company, and FDA approval is expected in 2017.

When Jefferies analysts attended the AAD conference, they mentioned the buzz for various new AD therapies including Crisaborole. They feel that Crisaborole peak sales will be $1 billion or more. Plus, they note that the fact that it is not a steroid is a positive from a safety concern level.

The Jefferies price target for the stock is $105, and the Thomson/First Call consensus target is $131.25. The stock closed Monday at $65.10, down over 4% on the day.

Celgene

This was one of the Jefferies top biotech picks for 2016. Celgene Corp. (NASDAQ: CELG) has an outstanding partnered pipeline, which most think is low risk and has the potential to yield several blockbuster drugs. Certain Wall Street analysts also think the company can grow earnings 15% on a compounded annual growth rate basis going forward. Otezla, which treats psoriasis and psoriatic arthritis, had achieved considerable prescriptions among physicians, but the scripts have slowed after a solid launch, showing the importance for sales outside of the United States.

Celgene’s blockbuster blood cancer drug Revlimid continues to dominate. Pomalyst sales also continue to be solid. Cancer drug Abraxane is also growing at a respectable rate, so the company continues to have a strong lineup of top-selling drugs. When the company reported its fourth-quarter financial results, earnings fell short of consensus estimates from Thomson Reuters, though revenue beat expectations. It’s worth noting that the net negative impact of currency on net product sales was 1%.

The stock jumped recently when Celgene and Natco came to a patent settlement, which removed a huge overhang on the stock that has been there for some time. Revlimid makes up over 60% of the company’s total revenue, and the analysts note that typically first quarter is seasonally soft for the drug. The Jefferies estimates for the quarter are pretty much in line with the street, and a slowing of the dollar’s strength would be a plus for the company.

Jefferies recently raised its price target to $146. The consensus target is $137.95. The shares closed Monday at $103.81.
Edwards Lifesciences

This company pioneered the artificial heart valve, and it could be poised for big growth. Edwards Lifesciences Corp. (NYSE: EW) provides products and technologies to treat structural heart disease and critically ill patients worldwide. The company offers transcatheter heart valve therapy products, comprising transcatheter aortic heart valves and their delivery systems for the nonsurgical replacement of heart valves.

The company also provides surgical heart valve therapy products, such as pericardial valves for aortic and mitral replacement, and minimally invasive aortic heart valve system, as well as tissue heart valves and repair products, which are used to replace or repair a patient’s diseased or defective heart valve.

Jefferies thinks that the company’s acquisition of privately held CardiAQ made good sense. CardiAQ has human implants of transcatheter mitrial valves, and Edwards is focused on the mitrial valve opportunity after its very strong success in aortic valves. The company also has had tremendous success with transcatheter valve replacement. Transcatheter heart valve replacements are rapidly gaining favor in the medical community for use in those patients who are deemed unsuited for open heart surgery, and they are a fast growing revenue stream for the company.

Edwards Lifesciences posted very solid quarterly numbers, and the analysts noted more centers were adopting transcatherter aortic valve replacement, and the number of procedures is increasing. U.S. sales grew 50%, versus the 35% posted last quarter. In addition, the PARTNER II data came out and showed superiority over surgery at the primary endpoint.

The $105 Jefferies price target is in line with the consensus figure of $105.30. The stock closed Monday at $105.99.

Vertex Pharmaceuticals

This company has long been considered a buyout candidate, and after the mauling the stock took in the biotech sell-off to start the year, it is even more of a candidate now. Vertex Pharmaceuticals Inc. (NASDAQ: VRTX) engages in discovering, developing, manufacturing and commercializing small molecule drugs for patients with serious diseases in specialty markets. The company focuses on developing and commercializing therapies for the treatment of cystic fibrosis (CF) and hepatitis C.

Wall Street as a whole has long been very positive on the stock, and some have indicated that the company could have as much as $10 in potential earnings-per-share power. The consensus also expects that Vertex should receive FDA approval for the company’s CF drug Lumacaftor (VX-‘809), which some think could generate billions in revenues.

Jefferies notes that even if there were a potential earnings miss for this quarter, any clarity that management can provide for full-year expectations, confidence in EU reimbursement processes or enthusiasm about ongoing Phase 1 trials for market-expanding next-gen correctors could help shares continue their recent bounce back. All of Wall Street is focused on the numbers for the Orkambi launch, and the analysts are at $235 million versus the consensus number of $264 million, and any full-year guidance for the drug is expected to be very conservative.

Jefferies lowered its price target to $108, and the consensus target is higher at $126.50. Shares closed most recently at $84.47.

While these are all very aggressive stocks, and only suitable for risk tolerant accounts, they could have big upside potential. Investors may want to scale buy some shares and keep some dry powder, should any of the earnings data knock prices back.

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