A cloud of uncertainty has engulfed the financial markets as investors the world over have to deal with global macroeconomic challenges led by the China downturn and falling oil prices. 

The NYSE ARCA Biotech Index (^BTK) and NASDAQ Biotechnology Index (^NBI) have plunged 26.1% and 21.8% respectively so far this year. The second half of 2015 had seen a huge sell-off in the biotech sector after Democratic Presidential candidate Hillary Clinton’s tweet on price gouging reignited the debate on high prices of drugs. Stocks like Valeant Pharmaceuticals (VRX) were the most impacted losing more than half of their net worth as the company was accused of following the same business model as Martin Shkreli, whose company had spiked the price of Daraprim from $13.50 to $750.

Moreover, the threat from biosimilars also looms large on the biotech sector with the FDA approving the first biosimilar, Zarxio, a bisomilar version of Amgen’s (AMGN) blockbuster drug Neupogen in 2015.

In such a scenario, investors are anything but optimistic. Having said that, things are looking up for the health care sector as bigwigs like Gilead Sciences (GILD), Biogen (BIIB) and Amgen topped estimates; Amgen also increased its outlook for 2016. On the other hand, Celgene’s earnings miss came as a disappointment.

Meanwhile, M&A and licensing deals will continue to take center stage in 2016 with Shire (SHPG) announcing to acquire Baxalta Inc. (BXLT) for $32 billion right at the start of the year. The company boosted its rare disease portfolio with the acquisition of NPS Pharma in 2015.

On the other hand, the outbreak of the deadly Zika virus has put the spotlight on companies striving to come out with treatment options for the same. These include companies like Inovio Pharmaceuticals (INO) and Intrexon (XON). Inovio has collaborated with GeneOne Life Science to test and advance a DNA-based vaccine for preventing and treating the emerging and virulent Zika virus infection while Intrexon is developing the same through its subisidiary Oxitec.

Given the strong fundamentals, healthy pipelines and the drive to find innovative treatments for rare diseases, it is never late to enter the happening biotech sector. Here we help you to identify some companies in the biotech sector that have the potential to beat earnings in their upcoming releases. These stocks are well positioned in today’s market environment, and could see considerable upside riding on the aforementioned trends. An earnings beat should help these stocks gain investor confidence and show a favorable price movement.

How to Pick?
Given a large number of industry participants, pinpointing stocks that have the potential to beat estimates could appear to be a daunting task. But our proprietary methodology makes it fairly simple. One way to narrow down the list of choices this earnings season is by looking at stocks that have the combination of a favorable Zacks Rank – Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) – and a positive Earnings ESP.

Print Friendly, PDF & Email