By Ben Levisohn
UBS analyst Mathhew Roden and team still like biotech stocks, but think it’s time to get more selective, recommending “high quality risk reward names” like Gilead Sciences (GILD) and Vertex Pharmaceuticals (VRTX), while downgrading Amgen (AMGN) and Regeneron Pharmaceuticals (REGN). They explain why:
Freya Ingrid Morales/Bloomberg News
Although we still think that biotech will continue to outperform the broader markets and the Health Care SPDR ETF (XLV), we are getting more selective with our price targets and ratings considering fewer near term catalysts with the power to drive material upward revisions (a key driver of stocks over the past 3yrs), coupled with the fact that our ultra-bullish thesis on midcaps has been rewarding, but to some extent has played out. Hence we now struggle to find near term conviction ideas, though we remain confident in the big bull case on a number of names if you look 12-24mos out. To reflect these views, we downgrade Amgen to Neutral and Regeneron to Sell on a relative basis…We raise our price targets on Gilead and Vertex.
Shares of Gilead Sciences have gained 1.2% to $114.30 at 9:43 a.m. today, while Vertex Pharmaceuticals has risen 0.6% to $122.21, Amgen has advanced 0.4% to $152.88, and Regeneron has dropped 1% to $504.40. The Health Care SPDR ETF has gained 1.1% to $74.71.
Barron’s Johanna Bennett recommended selling Regeneron last month.