UBS: Biotech Will Continue To Outperform In 2015

In a new report, UBS analyst Matthew Roden discusses the firm’s bullish outlook for biotech stocks. Biotech has had a strong run so far this year, but Roden still sees gas in the tank for several names.

3 drivers
UBS sees three drivers for biotech outperformance in the second half of the year. First, the firm is predicting that most of the larger names should beat consensus earnings estimates in Q3 and Q4.

Second, the firm sees big catalysts on the way for several names in the second half of the year that could drive prices higher. The report names Incyte Corp INCY, BioMartin Pharmaceutical Inc BMRN, Prothena Corp Plc PRTA, Puma Biotechnology Inc PBYI, Achillion Pharmaceuticals Inc ACHN and Medivation Inc MDVN as second-half catalyst plays.

Finally, Roden mentions the continuing appetite for biotech M&A as a share price driver for the rest of the year. He believes that large cap biotech and pharma companies are still looking to make asset acquisitions, and share prices will likely remain elevated in that type of environment.

Buying opportunity
Biotech stocks have been hit relatively hard during the recent market pullback. While Roden stops short of saying the worst is over at this point, he does believe that the dip has provided a buying opportunity for certain names.

Top picks
UBS believes that there is little downside risk remaining in Gilead Sciences Inc GILD and names the stock its top large cap biotech pick for the second half of the year. Medivation and BioMartin are UBS’s top two midcap picks, and Prothena is its top small cap play.