The biotech sector has been climbing higher over the last month, with the IBB iShares Nasdaq Biotechnology ETF gaining 8% since the end of January.
Citi Research analyst Mohit Bansal was out with a ranking of large-cap biotech names this week with a list that includes Amgen (NASDAQ: AMGN), Biogen (NASDAQ: BIIB), Biomarin (NASDAQ: BMRN), Regeneron (NASDAQ: REGN), and Vertex Pharmaceuticals (NASDAQ: VRTX).
At the top of his list is Vertex, which currently has a market cap of around $63 billion. However, Bansal sees that market cap rising far higher.
“VRTX could be the next entry in the $100B market cap club,” Bansal wrote. “VRTX appears miles ahead of others given its growth profile and reasonable valuation despite growth.”
Vertex develops drugs for rare diseases, with a particular focus on cystic fibrosis. Back in October, the FDA approved Vertex’s Trikafta treatment to combat the disease for roughly 90% of the cyclic fibrosis patients in the U.S.
Bansal said back in January that “we see [$500 million to $650 million] upside to consensus CF numbers in 2022-25 time-frame as we think Trikafta conversion could be rapid once initial bottleneck is resolved.”
The company’s “trifecta of high growth, long patent life and major pipeline catalyst in 2020,” the Citi analyst added. Bansal also highlighted Vertex’s growth, “reasonable” valuation, and what he describes as a promising experimental therapy to treat Alpha-1 Antitrypsin Deficiency.
Bansal rates Vertex shares a Buy and has a price target on the stock of $265, suggesting 8% upside ahead.
Jim Cramer said Thursday that now may be a good time to buy Vertex shares after the stock slipped -1% lower today.
“Vertex Pharma got dinged today, and I think this is a very buyable dip in what’s widely considered to be the hottest biotech story of the year,” Cramer said, adding that the company “accomplished something that was unthinkable not too long ago, a near-triumph over the scourge that is cystic fibrosis.”
Next on the Citi analyst’s list is Amgen. Bansal rates the stock a Buy and issued a price target of $275 – nearly 24% higher than the current price.
“We think in 2020 the company could do more than just catching up with the Nasdaq Biotechnology Index as the setup looks even better this time versus 2019,” Bansal wrote in a note from late January. The analyst argued that the uncertainty around sales drop-offs for Amgen’s products that now face bio similar competition had passed, and that the acquisition of Bristol-Myers Squibb’s psoriasis drug Otezla would boost growth for the company.
“AMGN story has more room to run. We think the setup looks better for AMGN in 2020 as there is less uncertainty this time around,” Bansal wrote, adding that Amgen has a number of major catalysts in the cards this year including data on treatments for lung cancer, asthma, psoriasis, and heart failure.
Third on Bansal’s list is BioMarin, which the Citi analyst rates a Buy.
RBC Capital Markets analyst Kennen MacKay is also bullish on BioMarin and recently upgraded the stock to Outperform, and boosted his price target from $111 to $113 – 26% higher than the current price.
MacKay said in a note that concerns surrounding BioMarin’s experimental ValRox gene therapy treatment for Hemophilia A are overblown.
“We see concern surrounding ValRox’s regulatory and market prospects as overblown and we’re increasingly confident that a potential launch could meet/beat what we see as relatively low expectations,” MacKay wrote in the note.
At the bottom of Bansal’s list is Biogen, which he rates a Neutral with a price target of $365.
Bansal wrote that uncertainty surrounding the company’s aducanumab treatment for Alzheimer’s, which the drug maker said it would seek regulatory approval from the FDA for even after it failed in clinical trials and was shelved in early 2019, was giving him pause.
“We continue to think the data are not strong enough to warrant an approval here, and investors would need to reassess their positioning through the year based on progress in approval process,” Bansal wrote.