Interesting comments about biotechs in general and Biogen's psoriasis drug...
Tuesday May 14, 1:02 pm Eastern Time
Merrill Touts Biotech Sector, But Says Be Selective
By: Michelle Rama, Of DOW JONES NEWSWIRES
NEW YORK -(Dow Jones)- After joining Merrill Lynch & Co . (MER) in late April, analyst Eric Ende reinstated the firm's coverage of the biotechnology seADVERTISEMENT
ctor with varying degrees of bullishness.
On the whole, Ende likes the sector's lower stock prices and long-term fundamentals. In a research note Tuesday, Ende wrote that he expects plenty of new product launches over the next few years because biotech companies have a robust pipeline of products in the late stages of development.
But Ende doesn't expect any of the new products to be really huge. He also pointed out that the Food and Drug Administration is becoming tougher.
"We recommend investors identify companies with strong and accelerating fundamentals - companies with prospects for sustainable growth of at least 20% with the potential for upside surprise," he wrote.
Ende cited Gilead Sciences Inc. (GILD), IDEC Pharmaceuticals (NasdaqNM: IDPH - News) Corp. (IDPH), Amgen Inc. (NasdaqNM: AMGN - News) (AMGN) and MedImmune Inc. (MEDI) "as our best large-cap ideas."
NPS Pharmaceuticals (NasdaqNM: NPSP - News) Inc. (NPSP), he said, is "our top small-cap pick." He initiated coverage of the stock at long- and near-term strong buy.
Gilead and IDEC are Ende's next highest ratings at long-term strong buy and near-term buy, and he resumed coverage of Amgen and MedImmune at near- and long- term buy ratings.
But the biotech sector is no Shangri-La.
On Genentech Inc. (DNA) and Icos Corp. (ICOS), Ende is more bearish, restarting both at near-term neutral and long-term buy. Meanwhile, he recommends selling Biogen Inc. (NasdaqNM: BGEN - News) (BGEN) in the near term while he's neutral on the shares long term.
On all of the stocks he's covering, he has either high or above average volatility ratings.
A Promising Pipeline
Ende said NPS Pharmaceuticals has two potential blockbusters, which are now in Phase III clinical trials. One drug is Preos for osteoporosis. The other is AMG- 073 for hyperparathyroidism. Both drugs, Ende wrote, "address large markets and which should reach peak sales of more than $500 million."
NPS has another "sleeper" drug in the pipeline called ALX-0600. The company plans to market the small bowel-syndrome drug on its own, meaning it will keep all the profits.
Meanwhile, Ende wrote that he expects Idec's earnings will increase 35% a year driven by continuing increases in sales of Rituxan, a cancer treatment, and " sustainability of growth driven by Zevalin," a treatment for on-Hodgkin's lymphoma.
Gilead Sciences is one of Ende's top picks because he projects long-term earning growth of over 35% driven by sales of the company's HIV drug, Viread.
At the other end of the spectrum is Biogen, whose growth prospects look dimmer than those of its peers. Ende said the recent release of Serono SA's (SRA) multiple sclerosis Rebif will hurt sales of Biogen's Avonex, the company's main drug. Also, Biogen's Amevive psoriasis drug candidate, which has been submitted to the FDA, "faces substantial hurdles for approval based on a dearth of long- term safety data," Ende wrote. |
