The prediction comes amid a broad correction for biotech stocks. Shares hit a excessive level in early February. Since then, they’ve tumbled 21% as of Wednesday’s shut, in keeping with MarketSmith.com. Investors fear regulators are cracking down on mergers and delaying drug approvals.
“With a string of recent negative data readouts and FDA setbacks, positive news would be sorely needed to generate a bounce back after biotech’s recent much-needed correction,” RBC Capital Markets analyst Brian Abrahams mentioned in a report back to shoppers.
Despite expectations for a delicate first quarter, Abrahams sees “a number of compelling values” throughout biotech shares. On today’s stock market, the trade group of biotech shares tracked by Investor’s Business Daily ticked up a fraction.
Biotech Stock Gilead: Hepatitis C Drugs Rebound
Select merchandise from Gilead, Biogen and Vertex might prime expectations, Abrahams mentioned.
Sales of legacy HIV therapies from Gilead — Genvoya and Odefsey — might are available gentle resulting from seasonal traits and elevated competitors from ViiV Healthcare’s Dovato, he mentioned. Gilead’s personal Biktarvy might additionally cannibalize gross sales.
But he requires hepatitis C therapy gross sales to greater than offset that softness. Cancer medication Yescarta and Trodelvy might shock to the upside, as might Covid-19 treatment Veklury given the continued pandemic.
Abrahams raised his value goal on the biotech inventory to 82 from 80.
Tecfidera Will ‘Fade,’ But Not Yet
There’s additionally “underappreciated resilience” from Biogen’s a number of sclerosis drug Tecfidera, which is now dealing with off in opposition to generics, Abrahams mentioned. Biogen additionally launched one other MS drug Vumerity. It’s experiencing a better-than-expected launch.
Abrahams requires gross sales of each to prime first-quarter forecasts.
“Though with Tecfidera still likely to fade away by next year and Vumerity likely to reach a ceiling, in our view, the fundamental benefits to Biogen remain limited,” he mentioned.
Still, buyers on this biotech inventory can anticipate upcoming catalysts within the type of late-stage take a look at outcomes for a Sage Therapeutics (SAGE)-partnered antidepressant. Further, the Food and Drug Administration is anticipated in June to think about approving Biogen’s Alzheimer’s drug, aducanumab.
Expanding Outside Cystic Fibrosis
For Vertex, prescriptions of cystic fibrosis therapies Kalydeco and Trikafta seem like monitoring in line. But Orkambi might prime expectations and offset a light-weight quarter for Symdeko, Abrahams mentioned.
He expects first-quarter gross sales to be broadly according to estimates. But that might put the corporate on observe to exceed the higher finish of its full-year outlook.
“Despite high CF market penetration, we still see room for additional modest CF franchise growth this year, which we believes continues to set a strong operational floor into pipeline data,” he mentioned.
Vertex is working to develop into different illnesses together with alpha-1 antitrypsin deficiency, sort 1 diabetes and focal segmental glomerulosclerosis. The former is an inherited illness that impacts the lungs and liver. The latter is a extreme kidney dysfunction.
Abrahams boosted his value goal on the biotech inventory by 1 to 265.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
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