http://blogs.barrons.com/stockstowat...rrons&ru=yahoo
we’ve said in the past that buying biotech when 1) it’s trading below the S&P500 multiple and 2) it’s trading near a “zero pipeline” value has generally been a winning solution over 12–18 months. The longest periods when these criteria existed were about Jan 2010–June 2011 post financial crisis and when Obamacare was being implemented and it wasn’t clear how HC would be impacted and investors didn’t want to own any HC stocks during this period. Eventually what turned it around in 2011–12 were big positive industry developments (first surprise positive Phase III Tecfidera data by Biogen, $11B acquisition of Pharmasset by Gilead Sciences, and Vertex Pharmaceuticals first major Orkambi Phase II data working) against the backdrop of a cheap and “underowned” group, such as we have right now. Currently, we’re about 6–9 months into those criteria (trade below S&P500 and near zero pipeline value), which is consistent with a view that we need to get through an election in 2016 and get some positive data in 2017 (Celgene Ozanimod, GED0301, Vertex Pharmaceuticals triple data, etc.)…
Large-cap biotech is near historical lows at 12–14x PE on forward 12 months (or on consensus 2017E EPS); this is below large pharma at 17x PE and the S&P500 around 16x PE. The low end includes the big four, Amgen, Biogen, Celgene, Gilead Sciences, whereas the 14x would include (ALXN) and (REGN) as well.
As for those no-pipline values, Yee estimates that would be about $225 for Biogen, between $135 and $145 for Amgen, $75 to $80 for Gilead Sciences, $75 to $85 for Vertex Pharmaceuticals, and $85 to $95 for Celgene.
Large-cap biotech is near historical lows at 12–14x PE on forward 12 months (or on consensus 2017E EPS); this is below large pharma at 17x PE and the S&P500 around 16x PE. The low end includes the big four, Amgen, Biogen, Celgene, Gilead Sciences, whereas the 14x would include (ALXN) and (REGN) as well.
As for those no-pipline values, Yee estimates that would be about $225 for Biogen, between $135 and $145 for Amgen, $75 to $80 for Gilead Sciences, $75 to $85 for Vertex Pharmaceuticals, and $85 to $95 for Celgene.
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