Despite the hard sell-off in the top biotech names last week, most Wall Street firms remain very positive on the leading stocks. The best thing about the carnage inflicted last week is it may have given investors looking to initiate or add to current positions a window to buy the stocks. As a reminder, the stocks got hit on a vague tax issue that may or may not be attached to the stocks. As we have pointed out, anything that originates in Washington, D.C., can take years to come to fruition.
In a new research report, the team at Cowen highlight upcoming catalysts and data that could send some of the top biotech names even higher. While large-cap biotech stocks are certainly safer than some of their smaller cap counterparts, we still caution that they are not suitable for accounts that are extremely conservative.
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Biogen Idec Inc. (BIIB) remains a top stock to buy not only at Cowen, but almost universally on Wall Street. The company will continue to dominate the relapsing multiple sclerosis market with its sector-leading drug Tecfidera. Plus, at the recent Cowen conference, cancer physicians said they would not use biosimilar Rituxan, a top Biogen drug, without complete clinical trials. The Cowen price objective for the biotech monster is $332 and is expected to be updated soon. The Thomson/First Call consensus target for the stock is $344.88. Biogen Idec closed Monday at $338.
Gilead Sciences Inc. (GILD) is a stock that the Cowen team thinks the Wall Street numbers are way too low on earnings for this year. Plus the uptake on its new drug Sovaldi has been faster than consultants expected. The analysts expect further acceleration after the all orals, anticipating 2015 treatment volumes could be two to three times more than this year. This would suggest 2014 Sovaldi sales could be $6 billion and 2015 sales could be more than $12 billion. Cowen has a $95 price target. The consensus target is $100.17. Shares closed Monday at $80.23.
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Illumina Inc. (ILMN) develops, manufactures and markets life science tools and integrated systems for the analysis of genetic variation and function in North America, Europe, Latin America, the Asia-Pacific, the Middle East and South Africa. The company's products include sequencing platforms that are based on its SBS technology and are designed to meet the various demands of a range of sequencing applications and array platforms. The Cowen team thinks the company could have $5 million to $10 million upside to first-quarter revenue numbers. Cowen raises its price target to $195. The consensus is at $165.63. Illumina closed Monday at $166.55.
United Therapeutics Corp. (UTHR) develops and commercializes products to address the unmet medical needs of patients with chronic and life-threatening conditions worldwide. Its lead product, Remodulin, is an injection used for the treatment of pulmonary arterial hypertension (PAH). The company also provides Tyvaso, an inhaled prostacyclin therapy, and Adcirca, a once-daily oral therapy for the treatment of PAH. The Cowen analysts think that Remodulin sales can increase significantly as physicians will be very hesitant to use generics. The Cowen price target is $130, and the consensus target is $104.80. The stock ended Monday at $100.31 a share.
Vertex Pharmaceuticals Inc.'s (VRTX) new drug VX809 has a 50% chance of succeeding in Phase III trials. In February 2013, Vertex began two six-month, international Phase III clinical trials of Kalydeco and VX-809 in people with two copies of the Delta F508 mutation ages 12 and older. The combination drug is for the treatment of cystic fibrosis. The U.S. Food and Drug Administration (FDA) has awarded Kalydeco and VX-809 "Breakthrough Therapy Designation," which is intended to speed the development of select potential therapies that treat life-threatening diseases or conditions. As a result of this designation, the timeframe of the Phase III trials of Kalydeco and VX-809 has been considerably shortened to accelerate testing. Most Phase III trials are about one year long. The Cowen price target is $75, and the consensus is posted at $92.65. Vertex closed Monday at $79.65.
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These kinds of catalysts are the events that can propel stocks significantly higher. While many bears on Wall Street say that biotech stocks are overvalued, the fact is that many trade in line with historical valuations. In the case of some of these stocks, the actual year-end revenues could end up being much higher than currently anticipated. If that is the case, they should be much higher in price.