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William Blair's Best Ideas In A Volatile Market

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William Blair analysts John Sonnier and Y Katherine Xu issued a note to investors on August 26 highlighting their best investment ideas in light of recent market weakness.

The analysts note, "While the major biotechnology indices are off 19% for both the Nasdaq Biotechnology Index and the NYSE Arco Biotechnology Index, we believe the fundamentals of the sector are largely disassociated from the root causes of the market turbulence over the past two weeks." The two analysts' best ideas include Celgene Corporation (NASDAQ:CELG), Exelixis Inc. (NASDAQ:EXEL), and Dynavax Technologies Corporation (NASDAQ:DVAX).

Celgene Corporation

Celgene develops and manufactures treatments for hematology, oncology, and autoimmune diseases. The company's flagship product is called Revlimid, used as a therapy for multiple myeloma.

John Sonnier sees "Celgene as the name that has the clearest financial visibility." The analyst currently has an Outperform rating on the stock, noting, "The company continues to grow its flagship product, Revlimid, while continuing to establish external collaborations and internally develop pipeline compounds."

Despite the recent market volatility, Sonnier lists several reasons for his bullish rating on Celgene. For one, the analyst notes that "Celgene continues to execute well operationally" and projects a "top-line growth rate of 18% and a bottom line growth rate of 24% though 2020."

Sonnier believes Revlimid is "well positioned to continue growing globally" and sees "potential for three additional drugs to enter the elite ranks of $1 billion in sales by 2017, including Abraxane in various solid cancers, Pomalyst/Imnovid in relapsed/refractory multiple myeloma, and Otezla in psoriatic arthritis and plaque psoriasis."

On a strategic level, Sonnier believes "that Celgene is among the best-positioned companies in the industry for long-term growth." Additionally, the analyst believes Celgene's "robust pipeline with over 17 Phase III or registrational-enabling studies out of 28 clinical trials…will hold potential to exceed [his] immediate-and long-term growth expectations."

Out of 14 analysts polled by TipRanks within the past three months, 11 analysts are bullish on Celgene, and three are neutral. The average 12-month price target for the company is $157.23, marking a 31.87% potential upside from where the stock last closed. On average, the all-analyst consensus for Celgene is Moderate Buy.

Exelixis Inc.

Exelexis discovers and develops genomics-based drugs. The company recently released positive Phase III trial results for its pipeline therapy, Cabozantinib, for the treatment of kidney cancer. While the trial met its primary end point, data was cut off before the second endpoint could be reached.

Sonnier believes "Exelixis has undergone a significant risk-debulking event…with positive Phase III readout with cabozantinib in renal cell carcinoma (RCC)." As such, he currently has an Outperform rating on the stock.

Sonnier sees "significant opportunity [for Exelixis] in the RCC space" as it's worth "about $1 billion in size." The analyst believes "cabozantinib could penetrate and prolong treatment duration in the disease setting and thereby expand the market." The analyst estimates that "peak annual sales for cabozantinib could be [between] $450 million- $500 million."

Additionally, Sonnier believes Exelixis is "entering a formative period with multiple stock moving catalysts," including "the full Phase III METEOR data presentation on September 26 at the European Cancer Congress" and the potential for "a global collaboration deal with potential partners, which could lead to a significant nondilutive cash infusion."

Out of two analysts polled by TipRanks within the past three months, one is bullish and one is neutral. The average 12-month price target for the company is $6.00, marking a 6.38% potential upside from where the stock last closed. On average, the all-analyst consensus for Exelixis is Hold.

Dynavax Technologies Corporation

Dynavax develops novel vaccines and therapeutics for infectious and inflammatory diseases and oncology by using TLR biology. The company is currently in Phase III testing for HEPLISAV, a pipeline vaccine for adults with hepatitis B.

Y Katherine Xu believes "Dynavax shares are significantly undervalued at the current price" given the company's "de-risked, late stage asset in Heplisav is poised to become a best-in-class hepatitis B vaccine, in addition to a propitious immunotherapy pipeline."  The analyst currently has an Outperform rating on the stock.

The analyst notes, "Heplisav recently passed its third and final Data Safety Monitoring Board review, removing the former safety overhang and taking Heplisav one step closer to becoming a best-in-class hepatitis B vaccine." She expects top-line data from the trial by the end of 2015 with the potential to be approved by the FDA in the third quarter of 2016.

Xu also notes that Dynavax's pipeline "contains SD-101, a promising immunotherapy indicated for different types of cancers. SD-101 is being examined in five clinical studies, including two trials in collaboration with Merck."

Y Katherine Xu is the only analyst polled by TipRanks who has rated Dynavax within the past three months. Her price target on the company is $42, marking a 55.21% potential upside from where the stock last closed.

On average, John Sonnier has a 64% success rate recommending stocks and a +26.5% average return per recommendation when measured over a one-year horizon and no benchmark. Additionally, Y Katherine Xu has a 50% success rate recommending stocks and a +10.5% average return per recommendation when measured over a one-year horizon and no benchmark.

Latest Ratings for CELG

DateFirmActionFromTo
Nov 2016OppenheimerInitiates Coverage OnOutperform
Nov 2016Standpoint ResearchDowngradesBuyHold
Nov 2016MizuhoInitiates Coverage OnBuy

View More Analyst Ratings for CELG
View the Latest Analyst Ratings

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