Over the past four years, the S&P 500 has increased a total of 66%. However, the Biotech sector outperformed the S&P 500 by a total of 218%. Thus, the question remains; Can the biotech sector continue to outperform the S&P 500 throughout 2015? According to J.P. Morgan, there are several factors that could have a positive influence on Biotech firms that can help the sector outperform the market.
With that said, BioTech companies are in an innovative environment with many treatments still in the early stages of development. These treatments will be a key driver for Biotech firms over the next several years.
Furthermore, the regulation for new drugs has become more flexible, which will foster the market entry of new innovative treatments.
In J.P. Morgan’s view, the acquisitions that happened during the end of 2014 could be a taste of what’s going to happen in the upcoming year and what will ultimately drive innovation even more.
JP Morgan’s analysts have chosen their favorite Biotech stocks as follow
Biogen Idec – BIIB (OW, $407 PT): “In our view, BIIB’s pipeline is one of the most compelling within the large cap biotech space, with highly innovative programs like LINGO inMS and various Alzheimer’s programs that, while early stage, have the potential to produce high profile data in 2015. On top of the strong pipeline, continued strengthin the MS business (Tecfidera specifically) should continue to drive top and bottomline growth.”
Alkermes – ALKS (OW, $60 PT): “We continue to see ALKS as a very attractive investment with a diversified and profitable core commercial portfolio, a deep and rapidly maturing specialized CNS pipeline offering plenty of near-term catalysts, and a strong financial position (lots of cash/CF positive and low taxes).”
bluebird bio – BLUE (OW, $103 PT): “In our view, BLUE – with its gene therapy platform – is one of the more potentially transformative and disruptive companies we’ve come across in some time. Importantly, however, this appears to be more than just a “big idea.” bluebird has already established promising proof-of-concept for its two lead products and is going after orphan indications with a very high unmet medical need that could bolster the ultimate probability of success.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Cory Kasimov has a total average return of 18.4% and a 55.6% success rate. Kasimov is ranked #458 out of 3427 analysts.
Alexion – ALXN (OW; $225 PT): “For PNH, on the 3Q call, Alexion noted continued steady growth in the core countries of US/ EU/ Japan and increasing contribution from the emerging markets of Brazil/Turkey/Russia, which we expect to continue in 2015.”
Ironwood – IRWD (OW, $20): “We have been impressed with market metrics for Linzess (linaclotide) and the DTC campaign has clearly had a positive effect. In 3Q, there were ~400K prescriptions filled versus ~326K in 2Q (+22% q/q). Additionally there was an increase in prescribers (3Q: 95K+ vs. 2Q: 81K+). In line with 2Q, post DTC, >85% of patient requests have been converted to a prescription. Linzess persistence is also meaningfully tracking ahead of Zelnorm/Amitiza.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Anupam Rama has a total average return of 96.6% and a 100% success rate. Anupam Rama is Ranked #1585 out of 3450 Analysts
Jazz Pharmaceuticals – (NASDAQ:JAZZ) (OW, PT – $190): “We see Jazz as well positioned from both an organic growth and acquisition standpoint. For now, Xyrem remains the company’s key growth driver; however, we see the company diversifying its reliance on Xyrem over the coming years via further acquisitions.”
BioCryst Pharmaceuticals – BCRX (OW, PT – $18): “We see BioCryst’s programs in HAE as the company’s key value drivers and see the company approaching two key potential inflection points for those assets in 2015. First, we expect phase I data for the company’s nextgeneration once-daily oral kallikrein inhibitors in the third quarter, and data for the key OPuS-2 trial of the company’s lead anti-kallikrein, BCX4161 by year-end ‘15. Assuming positive results, we believe BCX4161 could launch in 2017 and generate peak sales over $500 million. Potentially more exciting than ‘4161, BioCryst is also studying two next-generation oral kallikrein inhibitors, which early data suggests should have greatly improved specificity and oral bioavailability.”
Bottom line, there is a generally positive consensus for the Biotech industry in 2015. Although there could always be a setback in the upcoming year, the key factors that will drive the bright future are solid and therefore will positively influence Biotech companies in 2015.