Post Elections Analyst Weighs In on Favorite Biotechnology Stocks CELG, VRTX, INCY, GILDBy Carrie Williams
Biotechnology stocks had come under a lot of fire during the U.S election campaign due to the presence of certain unfavorable proposals in the health care policies of the two candidates. However, with Trump’s victory, biotechnology stocks definitely got the better deal as Trump’s healthcare policies had been less well-defined compared to Clinton’s. In addition, the failure of Proposition 61 is also expected to be major tailwinds for Biotech stocks. Jefferies’ analyst Brian Abrahams today picked innovative (CELG, VRTX, INCY) and low-multiple (GILD) names as his top favorite mid large-cap biotech stocks post the elections.
Trump had been always vocal against the existing Affordable Care Act (ACA), indicating a possible reversal of ACA during his presidency. Abrahams believes that such a move could result in volatility and uncertainty for a while and the reduced covered lives and reimbursability could also lower potential revenue pool for biotech drugs. However, Abrahams feels that Trump’s proposals like the drug re-importation and central Medicare Part D negotiation are not highly feasible and compared to the drug pricing initiatives of Clinton, ACA repeal is expected to be a net positive for biotech.
With almost 54% voters opposing Proposition 61 for lowering of drug prices, the power of the biopharma lobby was reaffirmed in the California ballot. Nevertheless, Abrahams believes that there is an overall shift happening towards greater pricing scrutiny and hence, revenue growth from price increases alone is not expected to be sustainable for the long term. Abrahams expects innovative companies with fewer competitors like CELG, VRTX, INCY, and GILD to perform better when compared to large pharma.
Abrahams also adds that repatriation and M&A might come into focus and benefit biotech in the next two months, although a few companies might decide to wait for more clarity on Trump’s healthcare policies.
Among the top biotech picks by the analyst, Vertex Pharmaceuticals Incorporated (NASDAQ: VRTX) has a Buy rating and a price target of $102, which is an upside of 9.8% from the last close of $92.88. Celgene Corporation (NASDAQ: CELG) is also a Buy with a price target of $140, an upside of 16.59% from the last close of $120.07. Incyte Corporation (NASDAQ: INCY) is rated a Buy as well, with a target price of $109. This is being an upside of 4.6% from the last close of $104.13. Gilead Sciences (NASDAQ: GILD) was also rated as Buy with a price target of $91, an upside of 15.9% from the last close of $78.47.