UPDATE: BTIG Initiates Coverage On Pharmacyclics

BTIG initiated coverage on Pharmacyclics, Inc. PCYC Monday with a Buy rating and $225 price target.

Analyst Hartaj Singh believed the “current valuation is a reflection of consensus inadequately modelling the rapid and broad uptake of ibrutinib in various liquid tumors. We are currently 10-25 percent above 2016-19 consensus sales and 20-40 percent above consensus-adjusted EPS, as we see accelerating sales driving operating leverage.”

Singh was “very bullish on the combination therapy potential for ibrutinib based on its unparalleled efficacy/safety profile and see the multitude of clinical trial read-outs in various lines of therapy starting to alter clinical practice over the next 12-24 months.”

“While competition is increasing in liquid tumors, we believe ibrutinib’s safety, tolerability and efficacy profile will make it the backbone of choice in combination therapy, which comprises 80-90 percent of the liquid tumor treatments,” according to the analyst note.

The key risks to Singh’s thesis are “execution risk” and “heightened competition.”

The price target was based “on a blended DCF and 2016e P/E multiple approach” and assigned “a 44X terminal multiple to the DCF and 2016 EPS.”

Pharmacyclics closed Monday at $119.97, down 3.61 percent.