4 Notable Wednesday Calls

Feb. 06, 2019 8:10 AM ETCDMO, MGNX, NBIX, SRPT, VRTX1 Comment
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The biotech sector sported small losses in trading Tuesday.  The sector began the day up but give up those gains by the close, partly on concerns on what drug pricing comments might be in the SOTU address which were minimal.  

MacroGenix (MGNX), a name that was recently put in The Biotech Forum's 'Holding Pen' after an exclusive 'deep dive', is looking like the big winner pre-market as the stock has roughly doubled after encouraging trial results.  An analyst at Citi is going to have eat some crow given he downgraded the name to a Sell earlier this week.

While we await trading to begin this Wednesday, here are four biotech stocks garnering positive analyst comments.

Let's start with Avid Bioservics (CDMO) which gets a 'shout out' at H.C. Wainwright today.  The small analyst firm reiterates its Buy rating and $11 price target on Avid with the following commentary.

Valuation and impediments to achieving price target. We maintain our Buy rating with a price target of $11. Our valuation is based on a discounted EBITDA model, which we believe takes into account both the established and anticipated revenue growth of Avid, which is the cornerstone of the company’s business. We assign a 23x multiple on F2023 EBIDTA discounted back at Avid’s WACC of 13%. We believe that Avid deserves a multiple premium compared to recent CDMO deals in North America, which were based on M&A transactions of mature business.”

Piper Jaffray is bullish on Sarepta Therapeutics (SRPT) ahead of upcoming limb-girdle muscular dystrophy data.  They reissue their Overweight rating and $200 price target on SRPT this morning.  Here is the synopsis of that analyst call.Unlike Duchenne muscular dystrophy, in LGMD the vector delivers the native hSGCB gene, meaning accelerated approval based on expression levels alone seems plausible.  The analyst cites Sarepta management and her firm's DMD expert. A safety finding in the data is the most unlikely outcome. She believes the stock would drop around 50% in this situation. Brill believes a more plausible outcome is hSGCB expression levels less than 20% but clean safety. She thinks Sarepta shares would drop around 10% in this scenario. The analyst, however, is most confident in a scenario where hSGCB expression is greater than 20% and safety is clean. She sees 10%-20% upside for the stock in this case.

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Cantor Fitzgerald maintains their Overweight rating and $127 price target on Neurocrine Biosciences (NBIX).  Here is their view on the company's recent Q4 results.

We reiterate our Overweight rating and raise our PT to $127 from $121 for NBIX. On Tuesday, Neurocrine reported 4Q18 revenues of $131.5M ($130M Ingrezza revs, pre-announced in Jan.) and cash of ~$867M, more than sufficient to fund pipeline and commercial effort into ’21. Although we expect Qt’ly growth to vary with the donut hole impact and seasonal variations, we remain convinced that Ingrezza sales will continue to grow in 2019 (in part due to the recent investments in the sales force and DTC campaign) and beyond. We also anticipate, but limit our valuation perspective from, the pipeline kicking in to contribute with (first at bat) an opicapone NDA filing this year and approval in ’20 for this potentially best-in-class and therapeutic paradigm-shifter, Parkinson’s candidate.”

Finally, JP Morgan retains its Overweight rating and $209 price target on Vertex Pharmaceuticals (VRTX) after that company's Q4 numbers with the following commentary

Following this afternoon’s print and guide, we thought VRTX’s 4Q conference call (initial thoughts here) was relatively straightforward. Bottom line: with a prevailing dominance in the CF space, a reliably growing topline, and a pipeline which is coming steadily into focus, we consider VRTX to be one of the cleanest growth stories in biotech. Maintain OW.

And those are four biotech stocks analysts like as we head into mid-week trading.

If I have learned anything in this long life of mine, it is this: in love we find out who we want to be; in war we find out who we are.” ― Kristin Hannah, The Nightingale

Thank You & Happy Hunting,

Bret Jensen

Founder, The Biotech Forum, The Busted IPO Forum & The Insiders Forum

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Disclosure: I am/we are long MGNX.

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