After seeing three years of incredible outperformance, biotech investors had a pretty large comeuppance starting in late February that lasted almost two months. A new research report from Cowen suggests that biotech investors appear to be looking forward to what they describe as a "return to normalcy" following the roller coaster ride of early 2014. As stock prices have stabilized, the jitteriness that pervaded many of their conversations with investors this spring has subsided and has been replaced by more complacent or nonchalant views toward the industry. While they do not expect a return to the biotech runaway freight train, they do cite bullish expectations for earnings growth from the premier names in the sector.
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The Cowen report had a list of the five biotech stocks that the analysts view as the most loved by the buy side and the portfolio managers that run mutual funds and hedge funds. Here are those five top biotech names.
Alexion Pharmaceuticals Inc. (ALXN) is still a top stock to buy at many Wall Street firms, and it has been considered by some firms as a potential acquisition target. Some analysts see likely strong accretive near-term to an acquirer, given the very impressive $1.5 billion in company revenues that are big enough to be significant to a bigger company. The company announced this week it is voluntarily recalling certain lots of Soliris, an intravenous drug for two potentially fatal blood disorders that can damage the kidneys, heart and brain. The Thomson/First Call consensus price target is $193.89. Alexion closed Monday at $167.05 a share.
Biogen Idec Inc. (BIIB) is one of top stocks to buy on Wall Street, and many predict that Biogen's Tysabri earnings will have a meaningful jump this year and beyond. Wall Street analysts also expect the company to reiterate guidance for anti-LINGO data in acute optic neuritis in the second half of this year, which provides the highest level of potential upside to Biogen's share price if the results are positive. Investors can also look forward to a Prescription Drug User Fee Act (PDUFA) announcement on June 20 for the company's hemophilia factor 8 Eloctate. The consensus price target for the biotech giant is $348.70. The stock closed Monday at $318.22.
GW Pharmaceuticals PLC (GWPH) is a favorite of the buy side, and many of the Wall Street biotech boutique firms list it as a top name to buy. Many analysts view the company's pipeline as a top strength with numerous possible 2014 catalysts. The company is focused on developing novel treatments from its proprietary cannabinoid platform. While the marijuana-related stocks are still controversial, this one is a solid favorite. The consensus price target is posted at a large $92.40. Share ended Monday trading at $67.36. A move to the consensus target would be a sizable 36% gain for investors.
Regeneron Pharmaceuticals Inc. (REGN) has been a performance monster over the past two years, and most Wall Street firms expect it to stay one. With treatments for everything from macular degeneration to colorectal cancer, the company continues to exploit an extraordinary pipeline. The company is viewed by many Wall Street firms as a leading candidate to be one the next generation biotech large cap leaders. The consensus price target is $345.83. Regeneron closed Monday at $309.27.
Relypsa Inc. (RLYP) is a small cap name most have not heard of, but it ranks incredibly high with buy-side accounts. The company is focused on the development and commercialization of non-absorbed polymeric drugs to treat disorders in the areas of renal, cardiovascular and metabolic diseases. The company's two-part pivotal Phase 3 trial of its lead product candidate, patiromer, for the treatment of hyperkalemia, a life-threatening condition defined as abnormally elevated levels of potassium in the blood, has been completed and the primary and secondary endpoints were met. The consensus price target for the stock is a whopping $53. Relypsa closed Monday at $22.42. A move to that gigantic consensus target would be a 133% home run for shareholders.
Just because top buy-side portfolio managers like these names doesn't mean investors should necessarily blindly buy them. However, the important thing is that these stocks are universally liked, and that mean scores of researchers have poured over the data and come to similar conclusions. Biotech investing is only for very aggressive accounts, and these top names could fit well.