Sterne Agee Dives Deep Into 3 Biotechs

Biotech stocks have performed well in the recent bull market.

Since January 1, 2008, the SPDR S&P Biotech ETF XBI has outperformed the SPDR S&P 500 ETF Trust SPY, gaining 233 percent compared with just 41.3 percent gains in SPY.

Analysts at Sterne Agee took a closer look at three active biotech companies in separate notes Friday morning.

Molina Healthcare, Inc. MOH

The company is committed to reaching a 1.5 to 2 percent net margin by 2017, Sterne Agee said. Despite this guidance, the analysts noted that they expect Molina to exceed this target by doing it more quickly. As such, the analysts placed a price target of Molina at $69 – $10 above the current price and maintained their Buy rating.

Salix Pharmaceuticals, Ltd. SLXP

Rumors that Valeant Pharmaceuticals Intl Inc VRX would offer more than $150 per share sent Salix more than $10 higher in the past two days. For this reason alone, Sterne Agee downgraded the company to Neutral. Though the analysts noted that Salix “could command an M&A premium” and that it was “highly unlikely” that Salix is independent in 12 months, they don’t want to recommend a stock based on M&A speculation.

Actavis plc ACT

Sterne Agee raised the Actavis price target to $315, a modest increase from the $312 prior target, but above current price at $282-283. Additionally, the analysts said they view Actavis management as “among the best in the industry,” giving them confidence that the company will execute. Into the company’s Investor Day, Sterne said it is looking for a focus on “long-term organic growth and synergies” – like the Allergan, Inc. AGN deal.