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UBS: Biotech Will Continue To Outperform In 2015

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UBS: Biotech Will Continue To Outperform In 2015
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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.

Three 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 (NASDAQ: INCY), BioMartin Pharmaceutical Inc (NASDAQ: BMRN), Prothena Corp Plc (NASDAQ: PRTA), Puma Biotechnology Inc (NYSE: PBYI), Achillion Pharmaceuticals Inc (NASDAQ: ACHN) and Medivation Inc (NASDAQ: 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 (NASDAQ: 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.

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