Investing

Biotechs Highlight Jefferies 4 Top Growth Stocks to Buy

Lee Jackson

Published: June 22, 2016 8:25 am

Last Updated: January 13, 2020 6:32 am

With the first days of summer, we usually see a slowdown on Wall Street as volumes, along with overall investor interest, drops in favor of vacations and summer fun. That may not be the case this year as the Brexit vote is right around the corner, and after that, more consternation over the Federal Reserve and a July rate hike, and, of course, politics. Now is the time to look for good growth stocks as the second half of the year could have solid upside after a flat first half.

This week’s top growth stock ideas from the analysts at Jefferies are dominated by some outstanding biotech and healthcare stocks. While more suited for aggressive growth accounts, the Jefferies team has their eyes on companies that have less binary event risk. We highlight four of this week’s top growth stocks all are rated Buy.

Celgene

This company was one of the top Jefferies 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.

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 the company has discussed at its recent conference the benefits of longer duration Revlimid. They also note that Celgene has a very compelling pipeline.

The Jefferies price target for the stock is $140. The Thomson/First Call consensus target is $136.82. The shares closed Tuesday at $96.86.

Medicines Company

This stock has been on a total roller-coaster ride over the past year. Medicines Co.’s (NASDAQ: MDCO) goal is to be a leading provider of solutions in three areas: serious infectious disease care, acute cardiovascular care and surgery and perioperative care. The company is focused on saving lives, alleviating suffering and contributing to the economics of health care by focusing on 3,000 leading acute/intensive care hospitals worldwide.

The stock shot up in the fall when the company announced news that an experimental cholesterol drug being co-developed with Alnylam Pharmaceuticals lowered LDL-C or “bad” cholesterol levels by around 83% in a small, early stage study. The drug, ALN-PCSsc, is an injected RNAi therapy designed to block the expression of the enzyme PCSK9, a protein that plays a critical role in regulating circulating levels of bad cholesterol in the blood.

The Jefferies team expects Phase 2 data for MDCO-216 and ALN-PCSsc, as well as Phase 3 data for Carbavance, all this year. Some Wall Street analysts are currently assigning a 60% probability of success to Carbavance, and successful Phase 3 data would take the probability much higher, and could lift the stock $3 to $4 higher.

The $43 Jefferies price target is less than the consensus target of $49.60. The stock closed Tuesday at $33.37.
Neurocrine Biosciences

This company is partnering with a top big pharmaceutical company, and the data has been very solid. Neurocrine Biosciences Inc. (NASDAQ: NBIX) discovers and develops innovative and life-changing pharmaceuticals, in diseases with high unmet medical needs, through its novel research and development platform, focused on neurological and endocrine based diseases and disorders.

The company’s two lead late-stage clinical programs are elagolix, a gonadotropin-releasing hormone antagonist for women’s health that is partnered with AbbVie, and valbenazine, a vesicular monoamine transporter 2 (VMAT2) inhibitor for the treatment of movement disorders. Neurocrine intends to maintain certain commercial rights to its VMAT2 inhibitor for an evolution into a fully integrated pharmaceutical company.

Jefferies recently hosted an investor event with an industry expect to discuss the KINECT 3 data. The expert believes that both valbenazine and a competing company’s drug are superior to current standard of care. Both drugs offer safety advantages, but there is a debate about whether the drugs will have black box warnings, which the current drug does. The analysts feel that valbenazivne is still on track for an NDA filing this year, and the Jefferies team sees a $1 billion potential for the drug, on which many of the doctors they recently surveyed were very constructive.

Jefferies has a $61 price target, and the consensus target is $69.25. The stock closed Tuesday at $42.71.

WisdomTree Investments

This is the real up-and-comer in the exchange traded funds business, and it is carving itself out an outstanding share with many specialized ETF offerings. Wisdom Tree Investments Inc. (NASDAQ: WETF) continues to benefit from the movement towards ETFs. This is especially true with the specialized currency hedged products, with the potential for significant uptake in interest rate hedged products.

Wisdom Tree is run by Jonathan Steinberg, the son of famous Wall Street financier Saul Steinberg. He is also married to Maria Bartiromo, who became very famous on CNBC and now works for the Fox Business Network. Steinberg has a long and very distinguished ETF background, going back to the product’s infancy.

Jefferies notes that the move away from commissioned-based mutual funds to a fee-based system for ERISA accounts is a positive for the company and feels financial advisers will shift to index funds and ETFs. The firm also points out that 55% of industry assets are still in commission-based accounts, leaving plenty of room for the fee-based model to grow. Plus, given all the changes, the company now is probably a very solid takeover candidate, as large mutual fund companies may be looking to add ETF product.

WisdomTree investors receive a 3.07% divided. The $13 Jefferies price target compares with the consensus figure at $11.47 and Tuesday’s closing price at $10.40.

Four solid growth stock buys for accounts that are looking for alpha potential. All of them are trading way below 52-week highs and are offering outstanding entry points.