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Biotech shares had a terrible 2021: The
SPDR S&P Biotech
trade-traded fund dropped 20.5% even as the
climbed 26.9%. This yr will be brighter for the sector, Piper Sandler analyst Christopher Raymond and his colleagues say.
In a research notice revealed on Sunday, Raymond stated that he advisable “selective buying” of biopharma stocks. On his list of top picks for the year are
AbbVie (ticker: ABBV),
Horizon Therapeutics (HZNP),
Biohaven Pharmaceutical Holding (BHVN), and
Jazz Pharmaceuticals (JAZZ), amid others.
“We see a macro set-up that skews mostly constructive throughout the market place cap spectrum for the sector,” Raymond wrote.
Some of the big anxieties that have worried traders off, which includes political attempts at overhauling drug pricing and queries about the regulatory strategy of the Biden-era Food items and Drug Administration, feel to be diminishing. Raymond wrote that on drug pricing, the “tone has evidently turned positive” for the field. And the Biden administration has named a new Fda commissioner, Dr. Robert Califf, a continual hand expected to obtain affirmation from the Senate early this 12 months.
Meanwhile, Raymond argued, it is likely to be a busy year for mergers and acquisitions. He wrote that the “M&A stars …appear aligned like no other time,” a scenario Barron’s manufactured in a recent short element. “With huge caps trading at 12.4X 2022 consensus EPS, we see meaningful benefit in front of what we had postulated in November could be a 2022 generalist rotation back into biopharma,” Raymond wrote. “For smid-caps, we also see price option.”
Raymond’s best big-cap picks,
AbbVie and Horizon, are up 26.4% and 47.3% more than the final 12 months, respectively. In a independent observe also printed Sunday, Raymond enhanced his focus on cost on AbbVie to $160, from a latest $129. He costs the stock Obese. The shares closed on Dec. 31 at $135.40, and were down 4% in premarket buying and selling on Monday.
“We continue on to view ABBV as an vital keeping for any investor on the lookout for comparatively secure exposure to biotech in 2022 and further than,” Raymond wrote.
As for Horizon, Raymond wrote that its “value generation over the previous two several years has been very little short of transformational,” citing the launch of its drug Tepezza, a cure for thyroid eye sickness. “Put simply, HZNP has manufactured the bounce to a entire-fledged big cap biopharma corporation, and with superior visibility into continued stellar business execution, we are anticipating even more a number of enlargement in 2022,” Raymond wrote.
Raymond said that he likes the “risk/reward established-up” for Biohaven, which is predicted to provide updates on a range of trials this calendar year. And he wrote that worry in excess of impending level of competition for a vital solution that has driven shares of Jazz down 22.8% about the earlier 12 months looks overblown.
Other 2022 picks that Raymond determined involve the midcap biotechs
Legend Biotech (LEGN) and
Kymera Therapeutics (KYMR), and the compact-cap biotechs
Praxis Precision Medications (PRAX) and
Gossamer Bio (GOSS).
Generate to Josh Nathan-Kazis at [email protected]