New Buys in Biotech: Two good values: ABBV, GILD and one speculative play: BLUE
Biotech Stocks Are Still Risky But Are Due For A Rally
Yesterday we published our first installment of the Rayno Life Science Portfolio for 2016. We believe large cap biopharmaceutical stocks will be less volatile and will outperform small caps as the sector bottoms in Q1 2016. The biotech sector is down over 20% YTD and has been in a bear market since September 2015 despite a Q4 rally. Unlike market trends in 2015 the biotech downdraft has coincided with negative macro news-flow and even correlation with crude prices. A strong dollar remains a major risk for multinationals. One assumption is that the negative sentiment on future drug prices is already reflected in the market.
Technicals: risk remains in the sector and an intermediate bottom cannot be certain until the IBB stabilizes near $260.
Abbvie (ABBV)…$56.49… offers good value has a robust product portfolio, a forward PE of 10.73, a PEG of 0.85, a P/S of 3.86 and pays a 4.23% dividend. Revenue growth is expected in the +13% range for 2016.
Gilead Sciences (GILD)…$85.80… has exceptional value but the stock has been hammered by concerns about competition for its HCV product franchise. Revenue is expected to decline by 2.95% in 2016. Forward PE is estimated at 6.84 with a PEG of 0.52. Dividend is 2%.
Bluebird Bio (BLUE)…$43.75…is a speculative play in gene therapy with the potential to cure two blood diseases beta thalassemia and sickle cell disease with its lentivirus (LentiGlobin) technology. BLUE’s T cell therapy (CAR-T) ex-vivo gene therapy platform has potential for treatment of hematologic and solid tumors such as multiple myeloma. Stockholder equity is $889M with about $700M in cash and investments (as of 12/31/15).
The Rayno Life Science Portfolios are under review pending 2015 earnings reports/guidance and general market conditions in particular the strong dollar.
Leave A Comment