William Blair's Top BioPharma Stock Picks For Q1 2015
Now that 2014 is coming to an end, what stocks should investors be on the lookout for in the first quarter of the New Year?
To answer this question, William Blair analyst Y. Katherine Xu named five biotechnology/biopharmaceutical stocks to watch.
Medivation Inc (NASDAQ: MDVN) is best known for developing therapies to treat serious diseases. Earlier this year, the biopharmaceutical company received FDA approval to expand the use of Xtandi, a prescription medicine used to treat men with prostate cancer.
Since the expansion of the drug was approved, Medivation’s stock has increased about 60 percent; the company brought in $200 million in revenue in its most recent quarter.
In the first quarter of 2015, Medivation is poised to report data collected from the TERRAIN study, which evaluated Xtandi in comparison to Casodex, a direct competitor of the treatment for metastatic prostate cancer.
Xu gave Medivation an Outperform rating and a $116 price target, reasoning that data from the TERRAIN study “could push Xtandi to eventually replace Casodex, becoming the biggest prostate cancer drug.” The analyst believes “Positive TERRAIN data will further push urology adoption,” which is the “key for Xtandi’s next leg of growth.”
Xu has rated Medivation twice since February 2011, earning an overwhelming +143.5 percent average return per recommendation.
Dynavax Technologies Corporation (NASDAQ: DVAX) is known for developing products to prevent and treat infectious and inflammatory diseases and cancer. Three total interim data safety monitoring board reviews have been scheduled for Dynavax’s HBV-23 treatment, the company’s adult hepatitis B vaccine candidate, with the first review recently completed in October of this year. The second review is set to occur in February 2015.
Xu gave Dynavix an Outperform rating with a $40 price target, noting “the focus of HBV-23 is on the safety side; therefor, each positive DSMB review should further de-risk the study.”
Xu has rated Dynavax six times since May 2010, earning a 67 percent success rate recommending the stock.
Tokai Pharmaceuticals Inc (NASDAQ: TKAI) focuses on developing proprietary therapies for prostate cancer and other hormonally-driven diseases. Tokai has plans to begin enrollment in its Phase III ARMOR3-SV study in the first half of 2015. The company’s Phase III study is meant to target men with prostate cancer who have shown resistance to Johnson & Johnson’s Zytiga and Medivation’s Xtandi.
Xu gave Takai an Outperform rating and a $44 price target. Xu acknowledged that “the development of a companion diagnostic to identify AR-V7 expression for the study enrollment, as well as FDA approval for this diagnostic, is a prerequisite to beginning this Phase III trial.”
Thus, “finalizing and validating the assay is the next major milestone to be achieved in the development program,” in her opinion. This is the first time Xu has given a recommendation for Tokai.
Vertex Pharmaceuticals Incorporated (NASDAQ: VRTX) develops new medicines for people with serious diseases. The final readout of Vertex’s 12-week Phase II study data of its cystic fibrosis treatment, Kalydeco, with placebo VX-661 in homozygous patients is expected during the first quarter of 2015.
The data will be benchmarked with two different studies titled TRAFFIC and TRANSPORT. The company is getting ready to start a Phase III trial in early 2015 in patients 12 years and older with cystic fibrosis.
Xu gave Vertex an Outperform rating with a $115 price target with the expectation that the data from the company’s study of Kalydeco and VX-661 will be "better than that observed with TRAFFIC and TRANSPORT.”
Xu last rated Vertex in January 2010, earning a +13.8 percent return.
Chimerix Inc (NASDAQ: CMRX), lastly, develops oral antiviral treatments in areas of high unmet medical need. The company plans to initiate a Phase III study of CMV and BKV, which will “determine the effectiveness of brincidofonier in the prevention of cytomegalovirus (CMV) and BK Virus (BKV) infection in kidney and kidney-pancreas transplant recipients,” according to Xu’s research note.
Xu gave Chimerix an Outperform rating and a $46 price target, noting: “The study initiation in the renal transplant setting will be followed by top-line data releases from two earlier Phase III programs during 2015- SUPRESS study data in the third quarter 2-15 and AdVise study data around the end of 2015.”
Xu last rated Chimerix in October of this year, earning a +15.4 percent return on the stock.
These five biopharmaceutical companies have a lot to look forward to in 2015 with Y. Katherine Xu remaining bullish on all of them.
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