Overhang and political rhetoric have paved a tough road for biotech stocks in the past year. Investor concern has been rampant, but the market seems to believe that the political rhetoric and near non-existent pipeline that has so plagued biotech in the past months are mostly priced in and long in the tooth.
According to RBC Capital analyst Michael Yee, stocks are poised for growth in the second half of 2016, as he believes that the factors that have inundated biotech stocks are behind us. People have been relatively fearful and uncertain about the upcoming election. No noteworthy events have sprung in the wake of political conventions and primaries and analysts note that, as of now, eight of the top S&P names are medtech stocks. In the coming second half, investors will want to pay attention to certain factors politically that will signal strength in the biotech market, namely, the maintenance of a republican majority in congress.
Yee highlights a few stocks that are poised for growth in the coming quarters such as Gilead Sciences, Inc. (NASDAQ:GILD), Celgene Corporation (NASDAQ:CELG), Vertex pharmaceuticals Incorporated (NASDAQ:VTRX), Amgen, Inc. (NASDAQ:AMGN), Biogen Inc (NASDAQ:BIIB), and BioMarin Pharmaceuticals Inc. (NASDAQ:BMRN).
Although GILD posted an earnings beat in their last report, the stock still dipped 10%. Although the company posted healthy earnings, it is nearly impossible for analysts to predict with certainty how the company will perform over the next quarter to a year. The stock is trading relatively cheap, as of now. The company also boasts very strong cash flow, a yield over 10%, and a dedicated management team. These factors could cause the stock’s P/E to turn around.
Celgene also remains a strong position for investors. The company posted a great quarter and raised its guidance. The company has released a marginally greater amount of information about their GED0301 drug, including a medical presentation of data. Topline data for the drug’s performance is expected in Q3. Consensus remains that this data will be strong, and Celgene remains at the top of large-cap managers’ interest list.
Vertex posted a lackadaisical quarter, maintaining guidance, and confirming that triple data should be released soon. Analysts believe that this data should look good, and the company’s management has stated that they will release a general overview of the data instead of a piece by piece explanation. Patients receiving the company’s drug will see increased exposure as dosage is upped. Analysts believe that Q3 will be another tepid quarter with a boost likely in Q4.
Amgen posted another healthy quarter, and the stock has seen a recent breakout. Analysts uphold that the company’s guidance figures are relatively conservative for both 2016 and 2017. Amgen has been praised more than any other large-cap biotech company lately. With a chance that there will be an injunction against Regeneron, investors should keep their eyes and ears open.
Biogen is another stock that, many analysts believe, will continue to soar higher. There is significant vulnerability and optionality for potential M&A opportunities. Bulls present a case where, following a great quarter, the company will be further exposed to this M&A possibility. Biogen is definitely a potential takeout candidate. If an M&A opportunity does not present itself, there is still a significant possibility that the company could be split up.
Finally, BioMarin maintains a relatively bullish sentiment. It is difficult for hemophilia gene therapy to be values, but many analysts uphold that it is currently widely undervalued. Safety has not been a big problem for BioMarin, and the company is expected to move onto further phases with lower dosages. Currency risk and Latin America pose some concerns for investors surrounding the next quarter, with bears insisting that there is a meaningful lack of durability in the company’s direction.