Tag Archives: biotechs

Biotechs With Snap Back Potential

Buying biotechs may seem like jumping without a net these days, but these stocks pack plenty of snap back potential.

Feb 15, 2016 at 10:01AM
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Image courtesy of Creative Commons, Flickr

Yikes! A few weeks into February, and the indiscriminate sell-off in biotech just keeps getting more unnerving.

But here’s the good news. With virtually ever biotech getting dinged, there’s growing upside for investors able to discern the value from the junk in the sector. While a bigger drop could certainly be ahead, a lot of the downside risk is likely baked in for companies with big catalysts ahead.

But what about all the political posturing about drug pricing? Won’t that continue to weigh? Here’s what the market is missing: Proposals to cut drug pricing have been discussed for many years, and the chances of changes materializing in the coming years are slim. In addition, recent high-profile concerns have focused on the pricing for older pharmaceutical drugs — not the kind of breakthrough treatments many biotechs are pursuing.

Biotech stocks are not for the risk-averse, however, since they drop or pop on a whisper. But maintaining a small position in a few well-chosen biotechs also adds a lot more potential upside to a well diversified portfolio. With that in mind, three of our contributors pinpoint stocks that could help boost your portfolio through 2016 and beyond. Head on over to Motley Fool for all three…here’s my pick for Comeback Kid.

An intriquing play in biotechs right now is multiple sclerosis treatment powerhouse Biogen (NASDAQ:BIIB). Several big upcoming catalysts could send this biotech blue chip’s share price sharply upward in 2016 — assuming that all goes well.

 Biogen expects data this year on a treatment with the odd name of LINGO, potentially the first drug to restore nerve damage caused by multiple sclerosis. Admittedly, LINGO is a long shot, and Biogen’s Alzheimer’s drug candidate aducanumab is even riskier. But the possibility that aducanumab could become an approvable therapy seems to be completely written out of Biogen’s price, so any positive results could skyrocket this stock.
Data on two other Alzheimer’s treatments earlier in development could also boost shares. Meanwhile, Biogen’s joint venture with South Korean-based Samsung in biosimilars is starting to look like a real business. The venture notched its first win with a biosimilar version of Amgen‘s rheumatoid arthritis drug Embrel. A second big win could come if EU regulators approve a biosimilar of Johnson & Johnson‘s blockbuster Remicade.
Biogen’s stock was beaten to its knees last year on concerns about slowing sales of its largest revenue driver Tecfidera (a blockbuster multiple sclerosis treatment), but earnings blew past Wall Street estimates in the recent quarter. Management also eased concerns about Tecfidera, saying U.S. demand has stabilized, while sales are growing in Europe. The company announced 11% growth in annual revenues and a significant cash stockpile of $3.4 billion. The size of that war chest gives Biogen ample ammunition for some price-moving acquisitions this year of either companies or drugs.

 

 

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