7-9-07 385 p. report from lehman. anyone who wants it, pm your email.
Mid-Cap Growth over Large-Cap Value
In this report, we provide our U.S. biotechnology outlook for 2H07 and review key
drivers for performance of 37 small, mid-, and large-cap biotech stocks. Overall,
we expect U.S. biotechnology stocks to trade in line with the broader indices in
2H07 and forecast 6.5% upside for the BTK by YE07, in line with the Lehman
Brothers S&P Index forecast.
! Within any biotechnology portfolio, we would advise overweighting mid-cap
emerging product companies over larger-cap and smaller-cap names. We
forecast long-term revenue growth of 22% for our mid-cap stocks compared with
10% for more mature large-cap names. Our top mid-cap picks include UTHR,
ONXX, and CEPH. Within the mid-cap group, we downgraded our rating on
MLNM to 2-Equal weight. While MLNM’s Velcade should remain a mainstay of
Myeloma treatment, we believe that competition from CELG’s Revlimid will limit
growth absent further label expansion.
! We view large-cap stocks as potential longer-term value plays. While we believe
that top- and bottom-line growth will continue to exceed that of other sectors over
the longer term, near-term visibility on regulatory, reimbursement, and competitive
challenges could temper upside potential. Our top large-cap pick remains GILD,
and we added CELG as a second pick following an upgrade in our rating to 1-
Overweight. Within the large-cap group, we expect AMGN to continue to
underperform and have downgraded our rating to 2-Equal weight.
! Lastly, in approaching smaller-cap development stage companies, we would
advise even greater stock selectivity, with focus on Phase II companies, generally
away from oncology and binary risk, and with EV/cash multiples of less than 2x.
Opportunistic investment is also advised with an eye to pipeline and balance
sheet strength. Our top small-cap picks include CVTX, ACAD, and NBIX.
i believe that these are the companies with detailed analysis:
Mentioned Company Ticker Price (29-Jun-2007) Stock / Sector Rating
Acadia Pharmaceuticals ACAD US$ 13.67 1-Overweight / 2-Neutral
Adolor Corp ADLR US$ 3.67 3-Underweight / 2-Neutral
Amgen Inc AMGN US$ 55.29 2-Equal weight / 2-Neutral
Amylin Pharmaceuticals AMLN US$ 42.28 2-Equal weight / 2-Neutral
Anesiva Inc. ANSV US$ 6.54 2-Equal weight / 2-Neutral
Arena Pharmaceuticals ARNA US$ 11.05 2-Equal weight / 2-Neutral
ARIAD Pharmaceuticals ARIA US$ 5.94 1-Overweight / 2-Neutral
AtheroGenics Inc AGIX US$ 2.10 3-Underweight / 2-Neutral
Biogen Idec BIIB US$ 54.50 2-Equal weight / 2-Neutral
Celgene Corp CELG US$ 57.33 1-Overweight / 2-Neutral
Cell Genesys CEGE US$ 3.62 2-Equal weight / 2-Neutral
Cephalon Inc CEPH US$ 80.39 1-Overweight / 2-Neutral
CV Therapeutics CVTX US$ 13.21 1-Overweight / 2-Neutral
Genentech Inc DNA US$ 75.10 2-Equal weight / 2-Neutral
Genomic Health GHDX US$ 19.32 2-Equal weight / 2-Neutral
Genzyme General GENZ US$ 60.85 1-Overweight / 2-Neutral
Gilead Sciences GILD US$ 38.80 1-Overweight / 2-Neutral
Human Genome Sciences HGSI US$ 9.07 2-Equal weight / 2-Neutral
Isis Pharmaceuticals ISIS US$ 10.07 1-Overweight / 2-Neutral
Micromet Inc. MITI US$ 2.60 3-Underweight / 2-Neutral
Millennium Pharmaceuticals MLNM US$ 10.57 2-Equal weight / 2-Neutral
NABI Biopharmaceuticals NABI US$ 4.56 2-Equal weight / 2-Neutral
Neurocrine Biosciences NBIX US$ 11.23 1-Overweight / 2-Neutral
NPS Pharmaceuticals NPSP US$ 4.53 2-Equal weight / 2-Neutral
Nuvelo Inc. NUVO US$ 2.86 2-Equal weight / 2-Neutral
Onyx Pharmaceuticals ONXX US$ 26.90 1-Overweight / 2-Neutral
OSI Pharmaceuticals OSIP US$ 35.75 3-Underweight / 2-Neutral
PDL BioPharma PDLI US$ 23.47 2-Equal weight / 2-Neutral
Regeneron Pharmaceuticals REGN US$ 18.10 1-Overweight / 2-Neutral
Rigel Pharmaceuticals RIGL US$ 8.58 2-Equal weight / 2-Neutral
Sunesis Pharmaceuticals SNSS US$ 3.54 1-Overweight / 2-Neutral
Synta Pharmaceuticals SNTA US$ 8.62 1-Overweight / 2-Neutral
Telik Inc TELK US$ 3.48 3-Underweight / 2-Neutral
Tercica Inc TRCA US$ 5.66 1-Overweight / 2-Neutral
Theravance Inc THRX US$ 32.44 2-Equal weight / 2-Neutral
United Therapeutics Corp. UTHR US$ 63.76 1-Overweight / 2-Neutral
ZymoGenetics Inc ZGEN US$ 14.26 2-Equal weight / 2-Neutral |
