In a bid to help investors identify the biotech companies that could be top stocks this year, we asked three top Motley Fool contributors to tell us which biotech stocks they think could head significantly higher in 2015. Read on to learn which companies they picked.
Source: Gilead Sciences.
Sean Williams: Admittedly, it's going to be incredibly tough for biotech stocks to outdo their 2014 performance anytime soon. In a year where the S&P 500 rose by 11%, the SPDR S&P Biotech ETF quadrupled those gains with a 45% return. I expect biotech could be in for a tougher year than many investors predict.
With that being said, I believe deep value will be what investors will be looking for -- value like Gilead Sciences (GILD +0.56%).
This isn't to say Gilead doesn't have its fair share of obstacles to overcome. Just weeks ago rival AbbVie announced a multi-year supply agreement with pharmacy-benefits manager Express Scripts for hepatitis C combo drug Viekira Pak, essentially knocking Harvoni/Sovaldi out of most genotype 1 indications, at least for consumers under Express Scripts' umbrella. Investors are clearly concerned that this move could incite a pricing war among high-priced prescription drugs.
As for me, I see Express Scripts' deal backfiring. While Gilead did face backlash from its pricing of HCV pills Sovaldi and Harvoni ($1,000 and $1,125 per pill, respectively), not having access to Harvoni, which can be given without side effect-laden ribavirin could cause patients to switch drugstores.
Ultimately, with 180 million people around the world afflicted with HCV, according to the World Health Organization, there are plenty of opportunities here for multiple players in the HCV market. I fully expect $10 billion-plus in HCV sales for Gilead in 2015, making its forward P/E of less than 10 incredibly attractive to both growth and value investors.
Cheryl Swanson: I agree with Sean; I think Gilead Sciences currently delivers the best value among the biotech bellwethers. But another biotech with relatively decent valuations that could pack a big wallop in 2015 is Biogen Idec Inc. (BIIB +0.15%).
Biogen recently released data on its mid-stage study of anti-LINGO-1 against an eye disease, and the stock has been volatile as investors struggle to interpret the results.
Overall, the actual trial results were a mixed bag, although Biogen reported them as "positive." Biogen's chief medical officer pointed out that it was the first clinical trial to provide evidence of biological repair in the central nervous system. I see that as encouraging, since Biogen's major hope for the drug is that it could reverse damage to the brain caused by multiple sclerosis, where it is also being tested. At the moment, multiple sclerosis can be managed but not cured -- but Biogen may now be a step closer.
Biogen is also bringing some measure of hope for Alzheimer's disease. Biogen's lead candidate against Alzheimer's recently skipped ahead to phase 3 testing, thanks to promising early results. Even if that drug (BIIB037) gets shot down, which is certainly very possible with a 99% failure rate among Alzheimer's treatments, Biogen has three more Alzheimer's drugs under development -- two with collaborator Eisai Co. Ltd.
Bottom line: While Gilead looks like the better buy right now, Biogen leads the $18 billion global MS market, and its launch of two hemophilia drugs will bring it some needed diversity in revenue. As 2014 fades in the rearview mirror, Biogen's focus is moving to its widening pipeline, and that should help set this stock up for a solid 2015.
Source: Celgene Corp.
George Budwell: Celgene Corporation (CELG +0.00%) is my biotech pick to soar this year. Although it doesn't exactly have a compelling valuation like Gilead at current levels, this stock should still have a great year for a couple of reasons.
First, Celgene's new psoriasis drug, Otezla, could provide a significant upside surprise in terms of revenue growth throughout the year. With the recent label expansion for moderate to severe plaque psoriasis in the U.S. and a looming European approval, Otezla could begin a rapid ascension into blockbuster territory, making it a key drug to watch going forward.
Celgene's flagship cancer drug, Revlimid, is also set for another big year. With several possible label expansions on the horizon, I think Revlimid could this year top even its staggering 16% sales increase in the first nine months of 2014.
Last, but certainly not least, the cancer drugs Abraxane and Pomalyst/Imnovid saw their sales bolt higher last year (36% and 159%, respectively), a trend that is expected to continue into 2015.
All told, I think Celgene's growing market share for its core cancer franchise (Abraxane/Pomalyst/Revlimid), as well as its psoriasis drug Otezla, should result in a 20% plus rise in revenue in 2015, making it one of the fastest growing large-cap biotech companies. As such, this stock looks, to me, like it should outperform many of its peers, and perhaps even the broader market this year.
