2 Value BioPharmacetuicals for Your Portfolio
Mohsin is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
In my recent articles, I have highlighted that investor’s love for the biopharmaceutical industry has ensured huge returns for some stocks. While this attention is good for the industry and investors have made a lot of money, it becomes pretty hard to find good solid value investments. Therefore I have tried to find a couple of good bargains which have still gone unnoticed and offer exciting opportunity for prospective investors.
Alexion Pharmaceuticals (NASDAQ: ALXN)
Alexion is Biopharmaceutical Company which focuses on discovery, development and commercialization of therapeutics for ultra-rare disorders in USA, Latin America, Asia Pacific and Europe. The company focuses on the areas of hematology, nephrology, neurology, metabolic disorders, oncology, and ophthalmology. Its major product is Soliris which is being used for the treatment of paroxysmal nocturnal hemoglobinuria (PNH) and is currently in Phase IV trials for the treatment of aHUS for pediatric/adults and PNH registry.
The stock is currently trading at a forward P/E of 25x and an extremely low PEG of 0.88x. The street expects Alexion to report an EPS of $ 2.9 for 2013 and $3.34 for 2014. The company has beaten analyst’s estimates with its last four earnings. Considering the very low PEG of Alexion we can use a P/E of 30x to reach a target price of $87 for 2013 and $100 for 2014. The mean sell side target price for the company is $114, a 35% premium to current valuations. The stock is also trading at a 40% discount to its 52 week price of $119. The valuations show that the company is trading at a significant discount, especially considering its ability to consistently beat analysts target prices.
Incyte (NASDAQ: INCY)
Incyte is a Biopharmaceutical company focused on the development, discovery and commercialization of treatments for inflammation and oncology. Its primary drug is JAKAFI which is an oral janus associated kinase inhibitor for the cure of myelofibrosis (MF). The primary drug candidate still in clinical trials is INCB18424 which is still in Phase III clinical trials. The drug is being tested for thrombocythemia, polycythemia, hematologic malignancies and pancreatic cancer.
The company is currently trading at a 16% discount to mean sell side target price of $25. The company has given investors a return of 25% in the last one year and 54% in the last 2 years. The stock is also trading at a discount of 20% to its 52 weeks high of $26. Incyte is very well placed in the MF market and is looking to build a stake in the Rheumatoid Arthritis market with its candidate barcitinib.
Incyte will control the competition to JAKAFI for another 2 years but there is a potential threat from Gilead (NASDAQ: GILD). Gilead is one of the world’s largest biopharmaceuticals involved primarily in formulating treatments for viral diseases such as Hepatitis and Aids. The company has recently acquired YM Biosciences for a whopping $510 million. This acquisition was made primarily for YM Bioscience’s drug candidate CYT387. The candidate is being tested for the treatment for myelofibrosis, which makes it a direct competitor to JAKAFI. Gilead will be taking the candidate into pivotal late-stage clinical trials during the second half of 2013. The announcements of these trials would be positive catalyst for Gilead stock price and can potentially negatively affect the stock price of Incyte.
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