Cowen analysts recently released a research report that focused on biotech stocks with promising Phase 3 data leading into the U.S. Food and Drug Administration (FDA) approval process.
ACADIA Pharmaceuticals (NASDAQ: ACAD), Alexion Pharmaceuticals (NASDAQ: ALXN), InterMune (NASDAQ: ITMN) and Merrimack Pharmaceuticals (NASDAQ: MACK) were among the stocks favored. Smaller biotech companies also mentioned positively in the Cowen report included Intercept Pharmaceuticals, Kythera Biopharmaceuticals and Relypsa.
Surprisingly the analysts found that, on average, stocks saw an 84 percent gain in the 12 months leading up to the FDA approval of leading drug candidates. Stocks also lost 24 percent in the 12 months following such an approval.
Below is a quick look at how ACADIA, Alexion, InterMune and Merrimack have fared and what analysts expect from them.
Pimavanserin, ACADIA's experimental treatment for Parkinson's disease psychosis, met its primary endpoints in a late-stage study in 2012. The San Diego-based biopharmaceutical company has a market capitalization above $2 billion. Its long-term earnings per share (EPS) growth forecast is about 20 percent, but almost 16 percent of the float is held short.
All but one of the eight analysts polled by Thomson/First Call recommend buying shares, with two of them rating the stock at Strong Buy. The mean price target, or where analysts expect the share price to go, is about 28 percent higher than the current share price and would be a new multiyear high.
The share price ended Wednesday up less than 15 percent in the past month, but still down almost seven percent year to date. Over the past six months, the stock underperformed the others featured here, pharmaceutical giants Eli Lilly and Pfizer, and the broader markets.
Alexion's only marketed product, Soliris, a treatment for rare neurological disorder called myasthenia gravis, was granted an orphan drug designation by the FDA. The Connecticut-based company sports a market cap of more than $32 billion. The long-term EPS growth forecast is more than 32 percent, and the operating margin is better than the industry average.
Of the 21 analysts surveyed, eight rate the stock at Strong Buy, and another seven also recommend buying shares. Analysts see plenty of headroom, as their mean price target is more than 15 percent higher than the current share price. The consensus target would be a new multiyear high.
The share price is more than 22 percent higher year to date, despite pulling back about two percent in the past month. Over the past six months, the stock has outperformed competitors Amgen and Baxter, as well as the broader markets, but it has underperformed InterMune.
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Already available in European Union, InterMune's idiopathic pulmonary fibrosis treatment Esbriet is awaiting FDA approval for launch in the United States. It has a market cap of more than $4 billion. Note that the return on equity is in the red, and short interest is more than 11 percent of the float.
For at least three months, the consensus recommendation has been to buy InterMune shares, and six of 14 analysts now rate the stock at Strong Buy. However, the share price has overrun the mean price target, meaning that the analysts see no upside potential at this time.
Shares are around 196 percent higher year to date, despite pulling back more than three percent from a recent 52-week high. The stock has outperformed not only the others featured here over the past six months, but competitor Gilead Sciences and the broader markets as well.
Its pancreatic cancer treatment drug MM-398 is now in Phase 3 trials, and a pair of directors bought more than $3 million worth of shares last week. Merrimack has a market cap of around $745 million. Its long-term EPS growth forecast is less than six percent, and short interest is about 23 percent of the float.
All six of the polled analysts recommend buying shares, and a move to their mean price target from the current share price would represent a gain of more than 46 percent. The consensus target would be a multiyear high. The street-high price target suggests shares could more than double.
The share price has retreated more than three percent in the past month but it is still up around 29 percent since the beginning of the year. The stock has underperformed InterMune over the past six months, but it has outperformed the others featured here and the S&P 500 in that time.
At the time of this writing, the author had no position in the mentioned equities.
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