The Biotech Industry Has Some Bargain Stocks
The biotech industry has become a field of attractive bargain stocks, and analysts point out certain key stocks here.
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Prices of biotech stocks have dropped, and that’s caused many of these stocks to become attractive bargains. Investopedia’s Mark Kolakowski refers to Barron’s analysts who have suggested some of these stocks to be Biogen ($BIIB), Amgen ($AMGN), Gilead Sciences ($GILD) and Celgene ($CELG).
According to these analysts, biotechs are basically in a healthy situation, with the S&P Biotechnology Select Sector Industry Index (SPSIBI) up 42.0% as of October 27, according to the S&P Dow Jones Indices. From its October 5 YTD high, it is down 5.3%. Analysts believe investors will get to adjust their blown up expectations. These stocks were down from the Monday, October 23 open through the Wednesday, October 31 close.
Biogen was down 5.5%, Amgen was down 4.1%, Celgene by 17.2% and Gilead by 7.1%. One of Barron’s analysts has already upgraded Celgene after its 19% plunge the previous week.
Biogen has a forward P/E of 13.99 with its consensus EPS estimates being $21.65 for 2017 and $23.26 for 2018. Biogen’s drugs deal with autoimmune, blood and neurological disorders such as leukemia, non-Hodgkin’s lymphoma, multiple sclerosis (MS) and hemophilia. However, Barron’s reports that its drugs for MS haven’t been selling well.
Amgen has a 13.72 forward P/E and $2.66 consensus EPS estimates for 2017, and $2.78 for 2018. Amgen has been focusing on medicines for various serious diseases that don’t have many treatment options around. That’s the key to Amgen’s success since it makes only a few drugs, but those drugs have high demand. As analyst Greg McFarlane reports, some of Amgen’s bestsellers deal with really serious conditions such as low white blood cell counts (Neupogen), colorectal cancer (Vectibix) and osteoporosis (Prolia). Barron’s reports that sales of its drug for treating psoriasis and arthritis, Enbrel, have sunk though.
Celgene has an 11.47 forward P/E with consensus P/E estimates being $7.33 and $8.73 for 2017 and 2018 respectively. It focuses its efforts on developing and selling drugs for treatment of inflammatory diseases and cancer. Its blood cancer medication Revlimid has been a blockbuster product, but of late its sales have struggled. The stock had a sell rating by Morgan Stanley before it was dropped and then upgraded from underweight to equal weight on the basis of a better risk/reward balance. That means the stock has got more attractive at a lower valuation multiple. What analysts were worried about was the fact that the company lowered its revenue guidance for 2020, from $21 billion to less than $20 billion but higher than $19 billion.
Gilead Sciences has a forward P/E of 10.69 and consensus P/E estimates of $8.71 and $7.01 for 2017 and 2018 respectively. The company focuses on drugs for HIV and hepatitis. It has recently acquired Kite Pharma, and this company is focusing on development of cell therapies to treat cancer. Gilead’s Hepatitis C medication has been experiencing declining sales and that has contributed to its EPS declining to around $3 billion in 2018 from $12.5 billion in 2015. The number of patients for this condition is declining and there are also competing drugs that are a lot cheaper.
Finally, analysts also point out other biotech stocks trading much lower since the October 23 open – So other Bargain Stocks include Regeneron ($REGN) at -7.5%, Alexion ($ALXN) at -12.4% and Ionnis ($IONS) at -9.7%.