July 14, 2016
By Mark Terry, BioSpace.com Breaking News Staff
Several Credit Suisse analysts took a hard and fairly technical look at several life science companies, narrowing their seven choices down to three whose pipelines look particularly interesting from a long-term investment point of view. The five companies they primarily screened were Amgen , Gilead Sciences , Vertex Pharmaceuticals , Celgene , and Alexion Pharmaceuticals . Biogen and BioMarin Pharmaceutical were also evaluated.
For the most part, the analysts set Gilead and Amgen aside. They noted that, “Gilead and Amgen valuations screen the best, suggesting little credit given to the pipeline, and that confirms where the discussion is for both stocks. Amgen and Gilead base-business NPVs per share are $166 (3% upside) and $85 (3% downside), respectively. This is not very surprising to us since most common feedback is around whether these companies will do deals to enhance their pipeline. We also think there is reasonable debate about long-term base business estimates for Amgen’s Kyprolis and Repatha and Gilead’s hepatitis C virus (HCV) franchise sales.”
Vertex Pharmaceuticals , headquartered in Boston, recently received U.S. Food and Drug Administration (FDA) approval for Orkambi (lumacaftor/ivacaftor) for patients with cystic fibrosis (CF). It is the first medication approved to treat the underlying cause of CF in patients with two copies of the F508del mutation.
Vertex jumped to $131.26 on July 2, but is currently trading for $87.84.
Perhaps the stock drop is related to the pricing of the drug, which is expected to cost $259,000 for a year’s treatment.
Credit Suisse says, “Our base business NPV for Vertex is $82, representing 9 percent downside with key 2017 pipeline opportunities in both 661 and triplet data.”
Celgene , based in Summit, New Jersey, has been called the fastest growing biotech stock by several analysts. Although the stock is a roller-coaster ride, the company’s strength lies in its development pipeline, which has about 30 drugs in it. Its commercial portfolio has fewer than 10 drugs, mostly cancer drugs, which make up the majority of company revenue. The rest are for inflammatory diseases.
Celgene is currently trading for $101.75.
Credit Suisse says, “Our base business net present value (NPV) estimate for Celgene is $87 a share (downside of 16%). Pipeline opportunities for Celgene are Revlimid lymphoma expansion, ozanimod, and mongersen (GED-301).”
Alexion , headquartered in New Haven, Connecticut, announced positive interim results today of a Phase I/II trial of intravenous SBC-103, an investigational enzyme replacement therapy in children with mucopolysaccharidosis IIIB, also known as Sanfilippo syndrome type B.
Yesterday the company was given an “outperform” rating by RBC Capital, with a $188 price target. In its analyst’s note, according to The Street, “The Cheshire, CT-based pharmaceutical company entered the rare disease sector in 2007 with Soliris in PNH (paroxysmal nocturnal hemoglobinuria), added aHUS (atypical hemolytic uremic syndrome) in 2014, and reported $2.6 billion in worldwide sales last year.”
The Credit Suisse analysts, as reported in Barrons, said, “Similar to the worst case in our Alexion upgrade note, this analysis suggests base business is worth $101 per share (downside of 19%) and includes Soliris erosion starting in 2021. Pipeline opportunities for Alexion include next generation Soliris success, mucopolysaccharidosis IIIB (MPS IIIB), myasthenia gravis (MG) and neuromyelitis optica (NMO) expansion.”
Alexion is currently trading for $125.21.
The analysts conclude with a brief look at BioMarin and Biogen, saying, “From this analysis, it suggests investors are giving BioMarin Pharmaceutical and Biogen the most pipeline credit. BioMarin’s base-business valuation is $50 a share, which is downside of 43 percent at current levels. Biogen’s base-business value is $157 a share, which is lower than our published ranges of $172 - $207. The reason for this difference is due to the fact that we exclude both spinal muscular atrophy (SMA) and Aducanumab [from Biogen] as well as the non-approved biosimilars. We tend to think valuations of $200 - $220 represent worst-case scenario suggesting one-year forward multiples of 10.8 - 11.9 times based on our 2017 earnings-per-share estimate of $18.48.”
BioMarin is currently trading for $88.22. Biogen is currently trading at $250.64.
