Analysts provide insights on healthcare giants Celgene Corporation (NASDAQ:CELG) and Johnson & Johnson (NYSE:JNJ), following an amended agreement and an investor day, respectively. One analyst has high hopes for Celgene, believing the agreement with AGIO represents a profitable opportunity and compelling entry point for shares, while he other is more lukewarm on JNJ, commenting on recent growth while questioning its ability to achieve growth.
Jefferies analyst Brian Abrahams commented on Celgene’s amended collaboration with AGIO, announced earlier this week. In addition to development of AGIO’s IDH inhibitors AG-120, Ag-221, and Ag-881, Celgene will now pay $200 million to AGIO to develop drugs which focus on metabolism pathways for immune oncology. The company is also giving back the ex-U.S. rights for AG-120. AGIO will lead RD for IO but split the costs and profits with Celgene for a $30 million fee. Celgene will also have an opportunity for a 65/ CELG 35/AGIO cost/profit split for another program for a $209 million payment.
The analyst believes this agreement will pose more of a longer term rather than a short term benefit, representing “CELG’s continued flexibility leveraging evolving science and partnership learnings to pivot into more strategic areas.” The analyst states that although company is exploring metobolic IO targets, timing and information are minimal, representing that the “discovery efforts are still in their infancy.” However, the analyst does believe that “in the long run, the collaboration could…accentuate CELG’s growing presence in the IO space” and that the expanded collaboration “will average synergies between the companies in the merging metabolic IO space.”
Regarding the returning of ex-us rights for AG-120, the analyst does not believe this will have a materially negative impact on the company. He explains, “We estimated ex-US revenues for AG-120 of $143M in the out-years, not material to CELG.” The analyst points out that AGIO stated Celgene’s returning of the rights was not caused by a dispute but rather a “simplification” of the agreement. The analyst explains, “We believe it may also signal CELG’s view that further investment in metabolic IO may ultimately be more fruitful.”
The analyst reiterates a Buy rating on the stock, with a $140 price target. He states, “We continue to view CELG’s growth prospects, pipeline breadth and R&D strategy as best in class and under-appreciated.”
Is it worth listening to this analyst? Check Abrahams’ historical performance and ranking Here.
According to TipRanks’ statistics, out of all the analysts who have rated the company in the past 3 months, 92% are bullish while 8% remain on the sidelines. The average 12-month price target for the stock is $141.30, marking a 40% upside from where shares last closed.
Johnson & Johnson
BTIG analyst Dane Leone weighed in on Johnson and Johnson following the company’s investor day yesterday. In the meeting, the company highlighted their plan to improve the consumer and medical device business. The company plans to grow its medical device market 4-6pct through 2020, supported by more “stable pricing environment” and increasing medical utilization rates. The company also discussed the collaboration between VERB surgical robotics and Verily, stating that it remains on schedule. They also plan to move to the product development phase by the end of 2016, which would result in JNJ as the “2nd major robotics player in the market.” The company highlighted the benefit of the technology, stating that “VERB technology could help penetrate harder areas of minimally invasive surgery such as thoracic and low anterior resections.”
The company also shed more light on its BioSense Webster, highlighting 19% growth in the first quarter of 2016 and its market leader position in electrophysiology. The analyst notes that this proves “JNJ successfully organic growth strategy.” The analyst also noted management’s desire to expand its presence in the cardiovascular space. Despite seemingly positive updates, the analyst still has a few concerns. He states, “We think that investor sentiment is supportive of achieving market growth within both sectors, but stability in Orthopedics and JNJ’s ability to achieve above market growth rates may still be a show-me story.”
The analyst maintains his Neutral rating on the stock without providing a price target. He states, “We think that positive fundamental revisions are more limited near-term.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Dane Leone has a yearly average return of 4% and a 60% success rate. Leone has a 11% average return when recommending JNJ, and is ranked #633 out of 3929 analysts.
Out of all the analysts who have rated JNJ in the past 3 months, 45% gave a Buy rating while 54% remain on the sidelines. The average 12-month price target for the stock is $117, marking a 3% upside from where shares last closed.