Large-Cap Biotechs Poised For Second-Half Rally, RBC Says

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RBC Capital Markets Analyst Michael Yee said in a new research note that the recent 5 to 6 percent pullback in large-cap biotech will provide a good opportunity heading into what they expect will be "mostly in-line to better" earnings. On a macro basis, Yee reiterated the firm's thesis that there is a trend of "innovation and new science driving [the] wealth of new breakthrough drugs."

RBC cautioned, however, that each quarter, there seem to be fewer "big beats" versus a year or two ago. Specifically, Yee pointed to Biogen Inc BIIB and Celgene Corporation CELG, which have struggled to perform as well as they had previously. The firm said that it maintains a long bias on Celgene and Biogen because of Alzheimer's treatments and a good "pipeline thesis."

Yee expects headline beats for Amgen, Inc. AMGN and Gilead Sciences, Inc. GILD. On Amgen, the analyst said that the company may beat EPS expectations based on "lower expenses," which should lead the stock to trade higher. However, Yee warned that the stock could stay "range-bound" until the Street has a better idea of where PCSK-9 pricing will be and how the company's biosimilars strategy takes hold.

Year-to-date, Gilead has risen the most among these equities, gaining nearly 20 percent. The stock has come 10 percent off June highs. Biogen gained more than 17 percent this year, though the stock at one time was up more than 40 percent. Celgene has increased a more modest 3.6 percent, while Amgen has been the worst performer – falling 4.4 percent this year.

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Posted In: Analyst ColorBiotechLong IdeasReiterationAnalyst RatingsTrading IdeasGeneralamgenBiogenCelgeneGildead SciencesMichael YeeRBC Capital Markets
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