Forget Gilead (GILD), Buy These Impressive Biotech Stocks Instead - Analyst Blog
2014 was an eventful year for Gilead Sciences Inc. GILD following the Dec 2013 launch of its blockbuster hepatitis C virus (HCV) drug Sovaldi in the U.S. The year also saw Gilead churning out another ground-breaking HCV drug, Harvoni, launched in the U.S. in Oct 2014. The company soared more than 26% in 2014 outperforming the S&P 500.
However, the company is up only 6.1% year to date (YTD), which leads to speculation about whether its heydays are over now. The company has fallen into some trouble lately.
Toward the end of last year, pharmacy benefit manager Express Scripts ESRX entered into an agreement with AbbVie Inc. ABBV adding the latter’s lower priced Viekira Pak to its formulary, as an exclusive option for HCV patients. With this move, the leading pharmacy benefit manager removed high-priced Sovaldi and Harvoni and Johnson & Johnson’s JNJ HCV drug Olysio from its National Preferred Formulary.
Since then, Gilead has entered into agreements with several pharmacy benefit managers and health care service companies. It even went on to state on its fourth quarter earnings call that it is undertaking several pricing measures including an increase in discount, charge-backs and rebates.
The biotech sector is witnessing changing dynamics with several big players burdened by pricing pressure and threatened by the entry of biosimilars.
In such a scenario, biotech companies with newer therapies or interesting pipeline candidates have been attracting a lot of attention. Big players are resorting to merger and acquisition (M&A) deals and licensing activity to bolster their beleaguered pipelines.
Last month, AbbVie entered into an agreement to acquire Pharmacyclics PCYC in a deal valued at approximately $21 billion to gain partial rights to Imbruvica. Imbruvica is expected to generate U.S. net product revenues of approximately $1 billion in 2015.
While the M&A frenzy shows no signs of slowing down, it’s time we overlooked Gilead for some biotech growth stocks.
Selecting Winners Among Plethora of Stocks
Picking the correct growth stocks from so many options could be a daunting task. However, with the assistance of our new style score system, one can locate stocks that have a solid growth potential.
Our Growth Style Score condenses all the essential metrics from the company’s financial statements to get a true sense of the quality and sustainability of its growth. Our research shows that stocks with Growth Style Scores of ‘A’ or ‘B’ when combined with a Zacks Rank #1 (Strong Buy) or #2 (Buy) offer the best investment opportunities in the growth investing space.
For finding the best growth picks, we first short listed biotech stocks that have a Zacks Rank #1 or #2 and carry a Growth Style Score of ‘A’ or ‘B.’ Flaunting a solid Zacks Rank and Growth Style Score these stocks are the best bets now.
Among the large-cap biotech companies, Biogen Inc. BIIB with a focus on neurology, immunology and hemophilia looks attractive. With its position in the multiple sclerosis market already established, this Cambridge, MA-based company is looking to explore newer areas. For example, the company is on the verge of entering the multi-billion biosimilars market with SB2 (biosimilar of Remicade) and SB4 (biosimilar of Enbrel), both under regulatory review in the EU.
This Zacks Rank #1 stock has a Growth Style Score of B. The company is seeing solid earnings estimate revision activity. In fact, over the past month, current year estimates have risen from $16.93 per share to $16.96 per share.
In the mid- and small-cap space, Geron Corp. GERN, a clinical stage biopharmaceutical company, looks interesting. Geron is focused on the development of its sole pipeline candidate, imetelstat, a telomerase inhibitor, for hematologic myeloid malignancies. Late last year, the company entered into an exclusive collaboration and license agreement with Janssen Biotech, Inc., a unit of Johnson & Johnson JNJ, for the development and commercialization of imetelstat.
This Menlo Park, CA-based company carries a Zacks Rank #2. The company has seen its current year estimate narrowing to a loss of 1 cent over the last 60 days. Geron currently has a Growth Style Score of A.
Another stock in focus is Anthera Pharmaceuticals, Inc. ANTH. The Hayward, CA-based company is developing and commercializing drugs for serious and life-threatening diseases including systemic lupus erythematosus and exocrine pancreatic insufficiency due to cystic fibrosis. The company’s pipeline boasts of two late-stage candidates – Sollpura and blisibimod.
Adding to the positives, this Zacks Rank #2 stock has witnessed a narrowing of loss estimate to $1.17 from $1.37 for its current year over the last 30 days. Anthera also has a Growth Style Score of A.
What Lies Ahead
Challenges like increasing competition, pricing pressure and the launch of biosimilars are something investors may have to get used to in 2015. At the same the time, growth prospects in the biotech industry cannot be ignored. This is why scouting beyond well-known names like Gilead with the help of Zacks' style score system can help you make excellent additions to your portfolio.
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GERON CORP (GERN): Free Stock Analysis Report
GILEAD SCIENCES (GILD): Free Stock Analysis Report
EXPRESS SCRIPTS (ESRX): Free Stock Analysis Report
JOHNSON & JOHNS (JNJ): Free Stock Analysis Report
BIOGEN IDEC INC (BIIB): Free Stock Analysis Report
ABBVIE INC (ABBV): Free Stock Analysis Report
PHARMACYCLICS (PCYC): Free Stock Analysis Report
ANTHERA PHARMA (ANTH): Free Stock Analysis Report
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