Goldman Sachs Highlights Best and Worst in Biotech for 2012

January 4, 2012 11:12 AM EST
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Analysts at Goldman Sachs said their best ideas in biotech for 2012 is Conviction Buy List-rated Gilead Sciences Inc. (Nasdaq: GILD) and Onyx Pharmaceuticals, Inc. (Nasdaq: ONXX) and Buy-rated Alexion Pharmaceuticals (Nasdaq: ALXN) and Vertex Pharmaceuticals (Nasdaq: VRTX).

On Gilead, they see significant multiple expansion as it transitions from a value to a growth story. For Onyx, numerous data readouts should drive estimates higher. For Alexion, Goldman said expect Soliris to keep delivering. Expect upside from the cystic fibrosis pipeline for Vertex.

Goldman said sell Amylin Pharmaceuticals (Nasdaq: AMLN) as they see regulatory and commercial risk to Bydureon ahead of January approval date.

Some key themes for 2012 will be:

1. Large caps will be more exciting on capital allocation decision and M&A will be in focus. M&A-ranked stocks are (Nasdaq: ALXN), (Nasdaq: DNDN), (Nasdaq: HGSI), (Nasdaq: INCY), (Nasdaq: ITMN), (Nasdaq: ONXX), (Nasdaq: MNTA), (Nasdaq: SGEN), (Nasdaq: VRTX), (Nasdaq: VRUS).

2. All smid-cap stocks in their universe that were in the midst of new product cycles were down in 2011. They see owning a group of these depressed stocks with exposure to new product cycles as one approach to capture either an inflection in launch trajectory or a potential acquisition. These include Neutral-rated (Nasdaq: DNDN), (Nasdaq: HGSI) and (Nasdaq: ITMN).

3. More of the same – Biosimilars, regulatory decisions, and data. For Biosimilars they see risk in AMGN post FDA guidance and potential upside in MNTA as a key beneficiary. On regulatory decisions, they are positive on GILD's Quad for HIV and VRTX's 770 for cystic fibrosis. They are concerned on key label expansions for AMGN's Xgeva and CELG’s Revlimid as well as AMLN's Bydureon for diabetes. On Data, they see upside in GILD post '7977 Phase 2 Hep C data and in ONXX for Nexavar/Rego Phase 3 cancer data.

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