The Zacks Analyst Blog Highlights: Gilead, Biogen, AbbVie and Shire

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Dec 17, 2014, 09:30 ET

CHICAGO, Dec. 17, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Gilead (Nasdaq:GILD-Free Report), Biogen (Nasdaq:BIIB-Free Report), AbbVie (NYSE:ABBV-Free Report) and Shire (Nasdaq:SHPG-Free Report).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Tuesday's Analyst Blog:

Top-Ranked Biotech Stocks for 2014

It has been a volatile and highly eventful year for the biotech sector characterized by mergers and acquisitions (M&A), deals galore, stretched valuations and the usual pipeline updates.

The sector, which had an incredibly good run over the last two years, went through a major selloff in late March triggered by concerns about the pricing of Gilead's (Nasdaq:GILD-Free Report) hepatitis C virus (HCV) treatment, Sovaldi. However, the biotech sector pulled off a slow but steady recovery with the NASDAQ Biotechnology index delivering a year-to-date (YTD) return of almost 32%. Here's a look at the year that was.

Deal-Making Frenzy Showing No Signs of Slowing Down

2014 has been one of the most active years where M&As and licensing agreements are concerned. While tax inversion deals were being actively pursued until a few months back, these cross-border deals do not look all that attractive now considering new rules imposed by the Treasury Department.

To combat thin pipelines and generic competition, pharma companies sitting on huge piles of cash continue to seek suitable acquisition targets. Licensing agreements and deals including deals with opt-in arrangements have also picked up pace with oncology remaining a favorite area Most of the deals signed by these companies are with big pharma companies and focused on cancer and immuno-oncology. According to the IMS Institute for Healthcare Informatics, more than 2,000 products are estimated to be in late-stage development at present -- oncology therapies make up for about one-fourth of this total.

Blockbuster Potentials Gain Approval

Several important product approvals as well as label expansions were gained this year. Gilead strengthened its position in the HCV market further with its combination treatment, Harvoni, gaining FDA approval. Harvoni is expected to bring in multi-billion dollar sales for Gilead.

Biotech Shines at ASCO and ASH

Several biotech companies came up with promising data on approved products as well as pipeline candidates at the annual meeting of the American Society of Oncology (ASCO) in Jun 2014. A key focus area was immuno-oncology which has been attracting a lot of interest. Immuno-oncology therapies have the potential to change the treatment paradigm for cancer -- they basically use the natural capability of the patient's own immune system to fight the cancer.

A Look at 4 Top-Ranked Biotech Stocks

Here's a look at 4 top-ranked biotech stocks that beat the market in 2014 and look poised to perform well in 2015.

Thousand Oaks, CA-based Amgen, a Zacks Rank #1 (Strong Buy) stock, had a strong run in 2014 with shares rising 40.5% YTD. This biotech major has consistently performed well so far this year and is poised to continue with its robust performance in 2015 as well.

Amgen's preliminary outlook for 2015 was better than expected -- the company's restructuring plan should make it leaner and more cost-efficient. Amgen's pipeline is also progressing with important candidates under regulatory review and major late-stage data readouts lined up for 2015 and 2016.

Cambridge, MA-based Biogen (Nasdaq:BIIB-Free Report), which focuses on the treatment of neurodegenerative diseases, hematologic conditions and autoimmune disorders, also had a good run this year. The company, which specializes in multiple sclerosis (MS) treatments, ran into a roadblock recently with its oral MS treatment being associated with a progressive multifocal leukoencephalopathy (PML)-related death. However, concerns regarding the drug's growth prospects seem overblown and this Zacks Rank #1 stock should continue with its stellar performance going forward. Shares are up 19.8% YTD.

Zacks Rank #1 stock, Celgene, is up 30.1% YTD. This Summit, NJ-based company's flagship product, Revlimid, continues to contribute significantly to the top-line. In addition to a promising pipeline, Celgene has quite a few products (Abraxane, Pomalyst and Otezla) in its portfolio that represent blockbuster potential.

North Chicago, IL-based AbbVie (NYSE:ABBV-Free Report) known for its multi-billion dollar drug, Humira, also looks well poised for growth after having performed well so far in 2014. Although the company did not go through with its planned acquisition of Shire (Nasdaq:SHPG-Free Report), it continues to work on growing its pipeline and expanding its portfolio. AbbVie's HCV cocktail treatment could gain approval shortly and allow the company to enter the highly lucrative HCV market. AbbVie's YTD return is 30.3% and the company holds a Zacks Rank #2 (Buy).

Looking Ahead

Strong pipelines, innovative treatments, impressive results, growing demand for drugs especially for rare-to-treat diseases, an aging population and increased health care spending should support growth in the biotech sector.

With the sector witnessing a lot of M&A and licensing activity this year, expectations are high that more such deals will follow. Companies that may attract such deals include those focusing on immuno-oncology, antibody drug conjugates (ADCs), CAR T-cell therapy, anti-infectives, HCV treatments, TCRs and breakthrough therapies. The development of personalized treatments will also gain momentum.

On the flip side, the high cost of treatments and the emerging threat of biosimilars remain dampeners for this high risk-high return sector.

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