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Biotech Shares May Use A Win — Will The First Quarter Be offering That?

Gilead Sciences (GILD), Biogen (BIIB) and Vertex Pharmaceuticals (VRTX) could top expectations in an otherwise soft quarter for biotech stocks, an analyst said Thursday.




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The prediction comes amid a broad correction for biotech stocks. Shares hit a high point in early February. Since then, they’ve tumbled 21% as of Wednesday’s close, according to MarketSmith.com. Investors worry regulators are cracking down on mergers and delaying drug approvals.

“With a string of recent negative data readouts and FDA setbacks, positive news would be sorely needed to generate a bounce back after biotech’s recent much-needed correction,” RBC Capital Markets analyst Brian Abrahams said in a report to clients.

Despite expectations for a soft first quarter, Abrahams sees “a number of compelling values” across biotech stocks. In afternoon trading on today’s stock market, the industry group of biotech stocks tracked by Investor’s Business Daily ticked up 1.3%.

Biotech Stock Gilead: Hepatitis C Drugs Rebound

Select products from Gilead, Biogen and Vertex could top expectations, Abrahams said.

Sales of legacy HIV treatments from Gilead — Genvoya and Odefsey — could come in light due to seasonal trends and increased competition from ViiV Healthcare’s Dovato, he said. Gilead’s own Biktarvy could also cannibalize sales.

But he calls for hepatitis C treatment sales to more than offset that softness. Cancer drugs Yescarta and Trodelvy could surprise to the upside, as could Covid-19 treatment Veklury given the continued pandemic.

Abrahams raised his price target on the biotech stock to 82 from 80.

Tecfidera Will ‘Fade,’ But Not Yet

There’s also “underappreciated resilience” from Biogen’s multiple sclerosis drug Tecfidera, which is now facing off against generics, Abrahams said. Biogen also launched another MS drug Vumerity. It’s experiencing a better-than-expected launch.

Abrahams calls for sales of both to top first-quarter forecasts.

“Though with Tecfidera still likely to fade away by next year and Vumerity likely to reach a ceiling, in our view, the fundamental benefits to Biogen remain limited,” he said.

Still, investors in this biotech stock can expect upcoming catalysts in the form of late-stage test results for a Sage Therapeutics (SAGE)-partnered antidepressant. Further, the Food and Drug Administration is expected in June to consider approving Biogen’s Alzheimer’s drug, aducanumab.

Expanding Outside Cystic Fibrosis

For Vertex, prescriptions of cystic fibrosis treatments Kalydeco and Trikafta appear to be tracking in line. But Orkambi could top expectations and offset a light quarter for Symdeko, Abrahams said.

He expects first-quarter sales to be broadly in line with estimates. But that would put the company on track to exceed the upper end of its full-year outlook.

“Despite high CF market penetration, we still see room for additional modest CF franchise growth this year, which we believes continues to set a strong operational floor into pipeline data,” he said.

Vertex is working to expand into other diseases including alpha-1 antitrypsin deficiency, type 1 diabetes and focal segmental glomerulosclerosis. The former is an inherited disease that impacts the lungs and liver. The latter is a severe kidney disorder.

Abrahams boosted his price target on the biotech stock by 1 to 265.

Follow Allison Gatlin on Twitter at @IBD_AGatlin.

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