[SHPGF] SHIRE PHARMACEUTCICA FOREIGN - UK*
Value to be found in biotech stocks
CSFB says now is the time to buy OGS, Shire and Serono
By Saskia Wirth, FTMarketWatch.com
Last Update: 11:04 AM ET Sep 26, 2001
LONDON (FTMW) - There's still value to be discovered in the embattled stock markets. According to some analysts now is the time to buy into the biotech sector, where genuine value can be found among the chaos.
Investment bank Credit Suisse First Boston said the current uncertain economic climate, triggered by the events in the U.S. and fears of a looming recession, may be a good opportunity to move into biotech stocks.
"While we would not pretend to be able to predict how the current unstable geopolitical situation will unfold, some genuine opportunities have been presented by the current climate of uncertainty," CSFB said in a research note.
The broker picked out three stocks that are expected to do particularly well: the UK's Oxford GlycoSciences [UK:OGS, News, Chart, Research] [US:OGSI, News, Chart, Research] and Shire Pharmaceuticals [UK:SHP, News, Chart, Research] [US:SHPGY, News, Chart, Research] as well as Switzerland-based Serono [DE:940868, News, Chart, Research] [US:SRA, News, Chart, Research] .
Top pick OGS
CSFB said as a world leader in proteomics, Oxford GlycoSciences' technology platform has the potential to create future value, while Vevesca, its lead product for Gaucher disease, is expected to generate near-term cash flow.
"The launch of Vevesca would produce the rarest of commodities among biotech companies, namely cash flow," the broker said. "Even if Vevesca is never launched, OGS still has the cash resources to survive for more than four years."
Credit Suisse rates the stock a "buy" and set a 12-month price target of £21.05. OGS shares were up 16.1 percent at 560 pence in afternoon trade.
"Even if Vevesca is never launched, OGS has the cash to survive for more than four years."
Oxford GlycoSciences focuses its research on identifying disease-related proteins, observing their behaviour in disorders such as cancer or Alzheimer's and how they respond to medication.
The company posted a jump in first-half turnover this week, beating analysts' expectations, and said it expects a significant expansion of its clinical pipeline in 2002 and beyond. See OGS alliances to pay off in 2002
Shire shines
Over recent months, Shire's shares price has been depressed by concern over generic competition for its biggest product Adderall, a treatment for Attention Deficit Hyperactivity Disorder.
But CSFB said it believes the company's follow-up once daily product Adderall XR will become the treatment of choice, adding that the importance of Adderall for the company's earnings growth was decreasing anyway. Analysts have previously expressed concern over the company's over-reliance on the drug.
"We believe (Shire's) valuation takes no account of the high growth of the company and the upside potential from new products," the broker said. It rates the stock a "buy" and set a 12-month price target of £13. Shares were up 2.7 percent at 908.5 pence. See also Shire gets FDA approvable letter
Serono's way is up
Credit Suisse said there was a high chance that Serono's multiple sclerosis drug Rebif would break the orphan drug status currently enjoyed by Biogen's (BGEN) Avonex, which gives the drug market exclusivity, and that this was not reflected in Serono's share price.
Rebif is expected to be a key driver of growth for the company and shares got a boost in June after a study showed Rebif was statistically more beneficial to patients than Avonex.
"Serono is attractively valued relative to the large-cap U.S. biotechs and the downside is protected by the infertility franchise," the investment bank said.
CSFB rates the stock a "buy" and has set a 12-month price target of Swiss francs 1,900. Serono shares were up 1.4 percent at Swiss francs 1,237 in afternoon trade.
In July, Serono reported a 25.6 percent jump in second-quarter operating income, beating analysts' forecasts, while Rebif sales were up 58 percent. See Serono Q2 results beat forecasts
Improving fundamentals
"Even in a harsher macro environment, fundamentals will prevail, which leaves biotechs geared towards recovery."
Analysts have long said that some biotech stocks promise huge returns in the long-term, but also don't tire of stressing many of the risks involved in this relatively young sector.
But Goldman Sachs is equally upbeat about biotech stocks, pointing towards the improving fundamentals. "Even in a harsher macro environment, fundamentals will prevail, which leaves biotechs geared towards recovery," it said in a recent research note.
"With share prices at current depressed levels, investors should begin to build positions in their favoured stocks," Goldman said, putting Celltech [UK:CCH, News, Chart, Research] [US:CLL, News, Chart, Research] , Crucell [NL:35856, News, Chart, Research] [US:CRXLF, News, Chart, Research] and Serono on its "recommended list".
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