An unprecedented pandemic did not stop the US stock market from ending 2020 on a high note. The S&P 500 ended a highly volatile year on the rise and, in general, rose 16.3%. In the meantime, several health sector stocks have sought attractive returns for investors. However, that list did not include Gilead Sciences and Biogen.
Does Wall Street expect these stocks to recover this year? We use TipRanks’ stock comparison tool to find out if analysts see upside potential at Gilead and Biogen and choose the stocks that offer the best investment opportunity.
Gilead Sciences (GOLD)
Gilead Sciences made headlines last year when its antiviral drug remdesivir (sold under the brand name Veklury) received emergency use authorization in May by the U.S. Food and Drug Administration (FDA) for the treatment of COVID-19. In October 2020, remdesivir became the first FDA-approved treatment in the United States for patients with COVID-19.
The company generated better-than-expected results in 3Q mainly due to remdesivir, which generated US $ 873 million in sales and generated an increase of more than 17% in 3Q general revenue, to US $ 6.6 billion. Gilead’s adjusted earnings per share in 3Q increased 29% year over year to $ 2.11. (See GILD stock analysis at TipRanks)
However, the company reduced its revenue forecast for 2020 to the range of $ 23 billion to $ 23.5 billion, from the previous perspective of $ 23 billion to $ 25 billion, and warned that revenue from remdesivir is subject to significant volatility and uncertainty. In addition, its business with the hepatitis C virus (HCV) remains under pressure in the midst of the pandemic.
Gilead has a strong HIV portfolio, including its main drug, Biktarvy. Sales of HIV products grew 8% to US $ 4.5 billion in 3Q and represented 70% of the company’s overall product sales. That said, there are concerns about the sales of the drug for HIV Truvada due to the loss of exclusivity.
Meanwhile, the company is strengthening its business through strategic acquisitions in key growth areas, such as oncology. Last year, Gilead acquired Immunomedics for $ 21 billion. This acquisition added Trodelvy, an FDA-approved metastatic triple-negative breast cancer treatment, to Gilead’s portfolio. The company also acquired Forty Seven clinical-stage immunonology company for $ 4.9 billion in 2020.
More recently, Gilead announced an agreement to acquire German biotechnology MYR GmbH, which focuses on developing therapies for the treatment of the chronic hepatitis delta virus.
Investors were disappointed when Gilead announced in December that it will not seek FDA approval for filgotinib as a treatment for rheumatoid arthritis in the U.S. after a meeting with the regulator. The company has entered into a new agreement with the Galápagos partner, according to which it will assume sole responsibility in Europe for filgotinib, where doses of 200 mg and 100 mg are approved for the treatment of moderate to severe rheumatoid arthritis and in all future indications .
In reaction to this development, Oppenheimer analyst Hartaj Singh reduced his target price from $ 105 to $ 100. However, the analyst reiterated a Purchase rating at Gilead, as he continues to believe his “(1 ) a reliable SARS-CoV outbreak / other medication business, (2) a low-digit, low-growth basic business (HIV / oncology / HCV) in the next two years, (3) operational leverage providing greater profit growth and (4) a dividend yield of 3-4%. “
Currently, the rest of the street is cautiously optimistic, with a consensus of moderate buying analysts based on 10 purchases, 12 retentions and 1 sale. The average price target of $ 74 suggests a potential increase of 27% compared to current levels. The shares fell 10.4% in 2020.
Biogen (BIIB)
2020 was a difficult year for Biogen, which specializes in treatments for neurological disorders. The company faced a setback in November, when the FDA’s Peripheral and Central Nervous System Medicines Advisory Committee voted against the effectiveness of aducanumab, an experimental antibody for the treatment of Alzheimer’s disease.
The news led to a major sale of Biogen shares, as investors saw aducanumab as a potential successful drug for the company. The Advisory Committee’s recommendations are not binding for consideration by the FDA and the company has disclosed that the FDA will continue the review process, with a decision on the approval of aducanumab to be made until March 7, 2021. (See BIIB in TipRanks)
To increase investor concerns, Biogen lost a patent dispute with Mylan in June 2020 for its best-selling multiple sclerosis drug, Tecfidera, which exposes it to competition from the generic version of Mylan. Tecfidera’s revenue fell 15% in 3Q to US $ 953 million, reflecting the impact of several generics entrants in the United States.
In addition, Biogen’s spinal muscular atrophy drug, Spinraza, is feeling the impact of Roche’s Evrysdi, with sales of the drug dropping 10% to $ 495 million in 3Q. Overall, the company’s revenue in the 3Q fell 6.2% to $ 3.4 billion, and the adjusted EPS fell 3.6% to $ 8.84. Biogen reduced its outlook for the full year to US $ 13.2 billion – US $ 13.4 billion, from US $ 13.8 billion – US $ 14.2 billion, assuming “significant erosion of TECFIDERA” in the 4Q .
Biogen has entered into strategic collaborations to gain access to drugs with promising potential. She recently announced a $ 1.5 billion (plus potential payments) agreement with Sage Therapeutics to co-develop and sell zuranolone (SAGE-217) for major depressive disorder (MDD), postpartum depression (PPD) and other psychiatric disorders and SAGE-324 for essential tremor and other neurological disorders.
After the deal with SAGE, Oppenheimer analyst Jay Olson reiterated a Biogen purchase rating with a target price of $ 300. Olson explained, “Zuranolone is a potential first class oral therapy for the treatment of MDD and PPD currently in several Ph3 studies. Given our view that zuranolone is an active drug and the considerable market opportunity in MDD / PPD, we believe that the business provides BIIB with some much needed revenue growth in the medium term and better positions for BIIB, regardless of the outcome of the aducanumab. “
Meanwhile, Street is pushed aside at Biogen with a consensus of Hold analysts based on 11 purchases, 13 suspensions and 5 sales. The average target price is $ 293.74, which implies a possible 20% increase in the coming months. Biogen’s shares fell 17.5% last year.
Conclusion
After a difficult 2020, the feeling of Street seems better for Gilead than for Biogen, supported by factors such as the company’s HIV portfolio and prospects in oncology. In addition, unlike Biogen, Gilead pays dividends and has a dividend yield of 4.67%.
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Disclaimer: The opinions expressed in this article are exclusively those of the analysts presented. The content should be used for informational purposes only. It is very important to do your own analysis before making any investment