Friday’s Biotech Insights: Celgene Corporation (CELG), Synergy Pharmaceuticals Inc (SGYP)


Oppenheimer analysts are chiming in with upbeat forecasts on two biotech players: Celgene Corporation (NASDAQ:CELG) and Synergy Pharmaceuticals Inc (NASDAQ:SGYP).

One analyst is out lifting the price target on Celgene following a fourth-quarter print that has left her excited on the biotech giant’s growth prospects. Meanwhile, another sees the coast as all clear for Synergy despite competitor drug Linzess receiving the green light, as data seems to be siding in Synergy drug Trulance’s favor.

Let’s take a closer look:

 

Celgene: Favorable Risk vs. Reward with Upside Potential

On the heels of Celgene posting fourth-quarter earnings yesterday, Oppenheimer analyst Leah R. Cann is moving full bullish steam ahead on the biotech giant, reiterating an Outperform rating on CELG while boosting the price target from $141 to $148, which represents a close to 33% increase from where the shares last closed.

For the fourth quarter, the giant saw 2016 EPS increase to 28.2% on a GAAP basis and 26.3% on an adjusted basis. Meanwhile, revenue reached 22.1% on back of 12.5% in volume rises for marketed products and 9.6% in price escalations. Operating margin for the quarter hit 28.2%. Additionally, adjusted EPS of $1.61 outperformed the analyst’s projection of $1.55 as well as consensus of $1.58. Why the beat? The analyst believes, “Earnings appear to have exceeded expectations due to a lower than estimated tax rate.”

However, though product revenue of $2.9768 billion mirrored the analyst’s expectations, the result missed the consensus estimate by 1.2% amid dipping estimated Thalomid sales and other revenue. Nonetheless, the analyst adds, “Pomalyst exceeded our estimates and consensus, and more than offset slightly lower than estimated Revlimid sales. Otezla exceeded our estimates by nearly 9% and offset lower than estimated Thalomid and Other sales.”

Ultimately, “Celgene reported a strong quarter and year-end that was in line with expectations. The outlook for Celgene’s clinical programs, based on today’s update, remain very encouraging and support long-term sales and earnings growth for the company. We are modestly increasing near-term estimates, which along with a higher group PEG rate, is leading us to increase our target price to $148 from $141,” Cann surmises.

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, one-star analyst Leah R. Cann is ranked #3,653 out of 4,378 analysts. Cann has a 23% success rate and loses 5.9% in her yearly returns. When recommending CELG, Cann misses 4.4% in average profits on the stock.

TipRanks analytics exhibit CELG as a Strong Buy. Based on 17 analysts polled by TipRanks in the last 3 months, 14 rate a Buy on CELG stock while 3 maintain a Hold. The 12-month average price target stands at $142.57, marking a nearly 28% upside from where the stock is currently trading.

In a Battle of Synergy vs. AGN and IRWD, Trulance Trounces Linzess

Allergan plc Ordinary Shares (NYSE:AGN) and Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) announced the approval of SGYP Trulance rival drug Linzess, a 72mcg treatment for chronic idiopathic constipation (CIC). Oppenheimer analyst Derek Archila believes the approval is “not to be feared,” as from his standpoint, Linzess’ results further show why Trulance is the better drug at the end of the day.

Archila opines with some back story, explaining, “Investors had viewed this as a potential risk to SGYP’s Trulance as it was thought the 72mcg Linzess dose may have lower rates of diarrhea and improved tolerability relative to the higher doses of Linzess […] and potentially equivalent to Trulance’s. Investors feared this would have impaired SGYP’s argument for Trulance as having improved tolerability vs. Linzess.”

However, now that AGN and IRWD have for the first time released study results for Linzess, it is possible to compare side-by-side the 72mcg diarrhea rates and how they measure up to Trulance. As it turns out, from the analyst’s assessment, the data rules in Synergy’s favor.

The analyst sings Trulance’s praises, elaborating, “Based on our review of the data, 12% (placebo-adjusted) of patients on the 72mcg dose experienced diarrhea. Recall in the 145mcg dose, the only other Linzess dose approved for CIC, 11-15% […] of patients experienced diarrhea. Trulance, on the other hand, saw only 4% […] of patients experience diarrhea.”

For Archila, this “news further validates our view that Trulance’s improved tolerability profile and flexible dosing—with or without food—will be key differentiators relative to existing branded CIC therapies and will drive adoption.

Therefore, the analyst reiterates an Outperform rating on shares of SGYP with a $10 price target, which represents a just under 72% increase from current levels.

As usual, we recommend taking analyst notes with a grain of salt. According to TipRanks, one-star analyst Derek Archila is ranked #3,573 out of 4,378 analysts. Archila has a 22% success rate and faces a loss of 6.1% in his annual returns. When suggesting SGYP, Archila forfeits 16.7% in average profits on the stock.

TipRanks analytics indicate SGYP as a Strong Buy. Out of 6 analysts polled by TipRanks in the last 3 months, 5 are bullish on Synergy stock and 1 remains sidelined. With a return potential of nearly 96%, the stock’s consensus target price stands at $11.40.

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