June 13, 2016
By Mark Terry, BioSpace.com Breaking News Staff
“Buy low and sell high” remains very basic but good advice. However, there are short-term and long-term considerations, as well as various goals. GuruFocus, which was founded in 2004 by Charlie Tian, writes for Forbes, taking a look at five biotech companies that fit nicely into a long-term investment strategy.
Biogen
Cambridge, Massachusetts-based Biogen is the first choice. Just last week, Biogen took a hard hit when its clinical trial for opicinumab (anti-LINGO-1) failed to meet its endpoints with a resultant stock drop that caused an $8 billion loss in market capitalization. It’s a dominant player in multiple sclerosis (MS) and strong presence in hemophilia A and B, non-Hodgkin’s lymphoma, rheumatoid arthritis and chronic lymphocytic leukemia (CLL).
It also has a strong and interesting pipeline, although some of its pipeline products, like BAN2401 and E2609 for Alzheimer’s disease are high-risk/high-reward products. Biogen has a history of swinging for the fences.
“In spite of the drastic correction in stock price,” wrote GuruFocus, “the long-term returns that Biogen generated for shareholders has significantly outperformed the average company.”
Celgene
Summit, New Jersey-based Celgene focuses on oncology and inflammatory diseases. Its drugs include Revlimid for multiple myeloma, myelodysplastic syndromes (MDS) and mantle cell lymphoma, Abraxane for breast, non-small cell lung, pancreatic and gastric cancers, and others. Back in March several analysts dubbed Celgene as the fastest growing biotech stock, although it’s been a bit of a bumpy ride.
“Once again,” GuruFocus wrote, “we see a clear correlation between monthly closing stock prices and earnings over the long run. But most importantly, it is clear that the best times historically to invest in Celgene have been when its price has been below its earnings justified level as it is today.”
Jazz Pharmaceuticals
Dublin-based Jazz Pharmaceuticals has a number of products to treat sleep problems and hematology and oncology. Products include Xyrem, for cataplexy and excessive daytime sleepiness (EDS), Erwinaze for acute lymphoblastic leukemia (ALL), and Defitelio for severe hepatic veno-occlusive disease. GuruFocus notes that since 2013 historical earnings growth has exceeded 20 percent annually.
“Jazz has produced exceptional gross margins since 2007,” GuruFocus writes. “However, net profit margins have been a little more erratic. Nevertheless, I consider this an intriguing research candidate at its current valuation.”
AbbVie
AbbVie , headquartered in North Chicago, Illinois, has a wide global reach, marketing Humira for autoimmune diseases, Imbruvica for chronic lymphocytic leukemia, VieKira Pak for hepatitis C, Kaletra and Norvir for HIV, and many others.
On April 28, the company announced it was acquiring South San Francisco-based Stemcentrx for $5.8 billion. In the process it will pick up Rova-T (rovalpituzumab tesirine), which is in clinical trials for small cell lung cancer (SCLC).
“Even though the history is short, AbbVie’s stock price has moved in tandem with earnings over the long run,” writes GuruFocus. “Moreover, periods of both overvaluation and undervaluation are vividly revealed. Currently, I consider this high-quality biotechnology company currently undervalued. My only reservation is the company’s high debt to capital ratio.”
Amgen
Thousand Oaks, California-based Amgen develops and markets products in oncology and hematology, cardiovascular, inflammation, bone health, nephrology and neuroscience. It markets Neulasta and Neupogen to held decrease infections in cancer patients, and Enbrel for rheumatoid arthritis, plaque psoriasis and psoriatic arthritis, as well as numerous others.
“Long-term estimates for Amgen’s future earnings growth are above average,” writes GuruFocus. “Adding the additional opportunity of an above-average and growing dividend income makes Amgen look solid at current valuations.”
The Motley Fool recently recommended three life science companies for the long-term investors, which included Bristol-Myers Squibb , Intuitive Surgical and Myriad Genetics .
