Barclays Downgrades 5 Biopharma Stocks, Upgrades Pfizer And Alexion

Biopharma companies are poised to benefit from U.S. tax reform related to repatriation of OUS (Outside the United States) cash or a rate change, as well as a lower priority being given to drug pricing reform, Barclays’ Geoff Meacham said in a report. He added, however, that biopharma stocks had rallied following the U.S. presidential elections.

The NASDAQ Biotechnology (NASDAQ: NBI) index had gained 9 percent post-elections, versus a 3 percent gain in the S&P. With the re-rating across biopharma, the stocks already reflect the positive catalysts, Meacham commented. He downgraded the rating on five stocks, while upgrading two.

5 Downgrades

1. BioMarin Pharmaceutical Inc. (NASDAQ: BMRN): Downgraded from Overweight to Equal Weight, with price target reduced from $125 to $105. Meacham expects BioMarin’s shares to come under pressure due to the company’s moderating growth and “an overall lack of catalysts” in 2017. He added that the hemophilia program may provide upside in the long term.
2. Johnson & Johnson (NYSE: JNJ): Downgraded from Overweight to Equal Weight, with price target reduced from $130 to $125. While there is no change as such to the fundamental outlook, the risk/reward profile appears “less compelling,” Meacham said, citing the “Remicade biosimilar risk, lower pipeline impact, slowing med tech utilization, and a move away from defensives.”
3. Seattle Genetics, Inc. (NASDAQ: SGEN): Downgraded from Overweight to Equal Weight, with price target reduced from $53 to $70. While Adcetris trends were tracking in line with expectations and pipeline visibility was improving, the company’s shares already reflect benefits from ALCANZA, ECHELON-1 and CD33A.
4. United Therapeutics Corporation (NASDAQ: UTHR): Downgraded from Equal Weight to Underweight, with price target reduced from $115 to $100. Orenitram uptake will likely be impacted by Uptravi, exerting pressure on the company’s broader outlook in PAH (Pulmonary Hypertension), the analyst stated.
5. Vertex Pharmaceuticals Incorporated (NASDAQ: VRTX): Downgraded from Overweight to Equal Weight, with price target reduced from $100 to $90. “Fundamentally, we don’t see much opportunity for Kalydeco/Orkambi/EPS upside in 2017. While VX-661 data in CF (1H17) isn’t a game-changer, the triple combo could be (POC data in 2H17) but the uncertain clinical profile sets up an unfavorable risk/reward, in our view,” the analyst wrote.

2 Upgrades

1. Alexion Pharmaceuticals, Inc. (NASDAQ: ALXN): Upgraded from Equal Weight to Overweight, with price target raised from $150 to $155. Meacham believes there are a number of positives for the company in 2017, including fewer macroeconomic headwinds, restoration of Soliris growth with gMG expansion, pipeline maturation with Soliris in NMO (Neuromyelitis Optica) and DGF (Delayed Graft Function), as well as progress with 1210. “We don’t view the 10-Q delay and whistleblower investigation as carrying risk of substantial Soliris sales restatement,” the analyst wrote.
2. Pfizer Inc. (NYSE: PFE): Upgraded from Equal Weight to Overweight, with price target raised from $37 to $38. “There is a higher likelihood that trapped OUS cash can be better utilized for productive M&A and return of capital to shareholders. Execution within the Innovative segment still matters; we see Ibrance as well as Xtandi (and talazoparib) as driving durable growth in oncology. We’d rather see more deals in Innovative rather than a generics deal to prop up Essential Health,” the Barclays report said.

At Last Check

• Alxion was up 0.96 percent at $120.53.
• BioMarin was down 2.55 percent at $86.11.
• Johnson & Johnson was down 0.57 percent at $112.48.
• Pfizer was up 0.7 percent at $31.77.
• Seattle Genetics was down 1.39 percent at $66.06.
• United Therapeutics was down 4.04 percent at $127.38.
• Vertex was down 1.14 percent at $85.91.

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