Biotech Predictions for Large Cap Firms Include Medivation, Inc., Gilead Sciences, Inc.

December 18, 2014
By Riley McDermid, BioSpace.com Breaking News Sr. Editor

All eyes in biotech are turning toward year-end analysis, predictions for what 2015 may hold and the busy January conference season for companies to roll out their heavy-hitting new blockbusters, Geoffrey Porges, head of the biotech team at Sanford Bernstein, said Thursday.

“After a recent rally in biotech stocks to close out 2014 and the end of a busy season of medical conferences, investor attention is turning toward the year-end reporting season and the key healthcare investor conference in early January,” he wrote in a note to investors.

In that note, Sanford Bernstein reviewed the “usual” performance of the large cap biotech stocks around the period of the conference and earnings, the disclosure practices of the 11 companies in their coverage, the likely timing and scope of the guidance they will provide, and how they have historically performed against that initial guidance.

“In recent years, larger biotech stocks have outperformed in the January/February period, especially during the [J.P. Morgan Healthcare] conference. We reviewed the performance of the large biotech companies in our coverage in the last seven years (2008-2014), assessing performance relative to the market leading into the conference, during the conference, between the conference and earnings, and just after earnings,” said Porges.

He said they found that for each of the periods examined, large cap biotech stocks tended to outperform the market in a slight majority of the instances reviewed, and median returns were slightly above the broader market. BR>
“Median outperformance was greatest during the conference itself, during which returns on large biotech companies outperformed the S&P by nearly 2.5 percent,” said Porges. BR>
Porges warned investors to expect limited guidance in early January, with most results to come in late January/early February. BR>
“As we noted last year, the previous practice of pre-announcing fourth quarter results and providing initial guidance in the second week of January appears to have mostly fallen by the wayside,” he said. BR>
In conclusion, Sanford Bernstein is asking investors to keep an eye on what has been a volatile market that could eventually take a downturn in 2015. “After a brief early 2014 correction, the biotech rally of 2012-2014 has continued apace, reaching record duration, breadth and magnitude,” he said. BR>
“We continue to see potential downside risk due to rising longer-term interest rates and rising stock volatility. In this context, we see selective opportunities in our coverage, including Medivation, Inc. and Gilead Sciences, Inc. in the short term.