Biotech Bull Market Key Trend No. 1: 5 Large Cap Biopharmas Plus 2

by: Rod Raynovich

Two Large Cap Pharmas Are Now Biotech Stocks: Abbvie, Inc. (NYSE:ABBV) and Bristol -Myers Squibb (NYSE:BMY)

On our last post on the subject we postulated a model that the bull market in biotechnology would ride with the large cap leaders because they are perceived as growth stocks in growing markets: Amgen (AMGN), Biogen (BIIB), Celgene (CELG), Gilead (GILD) and Regeneron (NASDAQ:REGN). For comparison we will add two large cap pharmas that have products and pipelines making them biopharmaceutical companies, plus they pay a dividend: ABBV BMY. Abbvie is the spinoff biopharmaceutical company from Abbott Labs with the $6B blockbuster drug Humira (R). Bristol-Myers BMY has evolved over the years through R&D and licensing from its core products to a pipeline in oncology, immunology and virology therapeutic areas.

Below find key metrics for these seven large cap biopharmaceutical companies. We will update and provide information on key areas for growth in 2014 after their 2013 financial reporting. Some key points on this model going forward are:

  • Price to Sales ratios of well known "biotech" companies are much higher anticipating growth in 2014.
  • PEs are less important right now than top line growth. PE expansion is expected.
  • Celgene and Abbvie stocks are laggards in the 2014. The sector (NASDAQ:IBB) is up 10%+ YTD.
  • Amgen is a more mature biopharma company grown through R&D and M&A.
  • Roche (OTCQX:RHHBY) is by far the largest broad -based drug and diagnostic company with a market cap of $236B.

Note: AMGN, BIIB, GILD, and REGN have been on our focus list for four years.

Company Ticker Price Market 2014 Rev P/S F P/E PEG B/Sh StockPer
Cap est $B est %YTD
Abbvie ABBV 50 79.5 19 4.18 15.7 1.31 2.25 -5.3 3.2% div
Bristol- Myers BMY 55 90 15.6 5.77 30.5 2.35 8.95 2.71 2.64% div
Amgen AMGN 119 89.9 19.6 4.6 14.6 2.11 28.8 4.5 2.05% div
Biogen Idec BIIB 310 73.6 8.3 8.9 26.8 2.16 34.3 11
Celgene CELG 168 69 7.5 9.3 23.2 2 14.3 0
Gilead GILD 82 125 14.4 8.7 24.7 1.46 7.1 8.6
Regeneron REGN 296 29 2.6 11.1 54.3 1.34 17.2 7.4
Click to enlarge

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. I am long Fidelity Select Biotechnology Fund FBIOX.