Guggenheim Names Top 2015 Picks in Specialty Pharmaceuticals; Sees Continued M&A (VRX) (ZTS) (NEOT)

Guggenheim's Specialty Pharmaceuticals analyst Louise Chen released a note on her best ideas in the sector going into 2015. In their coverage of 26 stocks, Chen likes Valeant Pharma (NYSE: VRX), Zoetis (NYSE: ZTS), and Neothetics (NASDAQ: NEOT).

Valeant Pharma - "For VRX, we expect strong organic growth (4Q14 & 1Q15) and a potential deal in '15 to drive upward earnings revisions and multiple expansion for the stock."

Zoetis - "On ZTS, although the Street has been cooling off to Animal Health stocks, we believe that ZTS is well positioned to outperform expectations in '15. We think upward earnings revisions (from margin expansion, business development, pipeline advancements/new launches, share buyback) will drive the stock higher."

Neothetics - "NEOT is our top small cap pick for '15. Post the company's IPO in November the stock is down 53% versus the S&P up 13% (due to technical headwinds, in our view, since the story remains the same). We think positive data at the end of '15 for NEOT's lead drug LIPO-202 (non-surgical liposuction) will drive shares much higher. Similar companies (KYTH, DERM, RVNC) in the aesthetic/derm industry have much larger market caps than NEOT."

In addition, the firm believes M&A will continue to be a key theme in 2015, in our view. The stocks in the firm's coverage universe that they view as attractive companies in a consolidating space include ACRX, AKRX, IPXL, JAZZ, TTPH, KIN, DERM, ANIP, and ORX.SS. Companies that we believe still need to do deals include TEVA, MYL, and VRX.

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