Jefferies' Best Biotech Ideas For 2016 (And Beyond)

In a report issued Wednesday, Jefferies’ Biotechnology Equity Research Team shared its outlook, key themes and best ideas in the biotechnology industry for 2016 and beyond.

After a volatile 2015, the experts assured they would be selective into the new year as sector headwinds (like "election-year drug pricing rhetoric" and maturing and increasingly crowded markets) persist. Having said this, they noted that "solid underlying fundamentals and potential for stabilization" lead them to believe substantial long-term value could still be unlocked in some companies.

Going forward, they see nice returns coming from biotechs with products that treat unique populations, which are highly differentiated, and in new or large markets not served optimally yet.

Top Picks

The note went on to look into Jefferies’ top picks in the biotech segment.

Among large-caps the experts like Biogen Inc BIIB for its "likely MS franchise resiliency and under-appreciated pipeline readouts." They also think Celgene Corporation CELG's multiples could expand, reacting to "commercial execution and dataflow with IP overhang now removed."

In the mid-cap space, the analysts favor The Medicines Company MDCO, due to expectations for favorable ALN-PCSsc and carbavance data in the second half of the year; Swedish Orphan Biovitrum publ AB SOBI, on the back of the potential for 39 percent EPS CAGR driven by hemophilia launches; and Ultragenyx Pharmaceutical Inc RARE, for its low-risk rich catalysts for the second half of 2016.

Top small-caps picks include Alder Biopharmaceuticals Inc ALDR, AMAG Pharmaceuticals, Inc. AMAG, Ignyta Inc RXDX, Oncomed Pharmaceuticals Inc OMED and TherapeuticsMD Inc TXMD.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.