China seen as the next big growth area for biotechs Biogen and Amgen

Published Tue, Nov 12 20198:02 AM ESTUpdated Tue, Nov 12 20194:01 PM EST

SunTrust initiated coverage on Biogen and Amgen on Tuesday, rating each stock as a buy based on solid drug pipelines and growth opportunities in China. SunTrust's bullish thesis on Biogen is based on the company's Alzheimer's drug aducanumab. In October the company said it was once again seeking regulatory approval for the drug , which would be the first of its kind in the billion-dollar Alzheimer's market. SunTrust also points to Biogen's strength in biosimilars, which are generic versions of biologic medicines used to treat illnesses like cancer and autoimmune diseases, as well as growth opportunities in China. "We believe in the risk/reward profile into aducanumab FDA approval," analyst Robyn Karnauskas said. "We think their biosimilar business will help them grow as their interest in the Chinese market for their biosimilars and their capital allocation strategy with Samsung Bioepis will add upside. The biosimilar portfolio will continue to evolve and grow, so we could see further upside from additional markets, such as China," she added. The firm has a $337 target on Biogen, which is 15% higher than where the stock closed on Monday. Karnauskas also believes that Amgen will benefit from growing demand in China. "We think their ability to grow mid-cycle products & their biosimilar business will get them back to growth. Their interest in the Chinese market for their drugs and their capital allocation strategy we believe will add upside," she said of the California-based company. "We believe Amgen's pipeline could provide upside surprise catalysts beginning in in late 2020. We think growth from these products is not reflected in Street models," she said. Her $256 target implies a 16% rally ahead. She added that the company has a history of exceeding Street expectations, and that larger, diversified biotech companies are the ones to bet on ahead of the election since there's less political risk. Biogen has lost 2% this year, while Amgen has gained 13%. The iShares Biotech ETF is up 14% for 2019. - CNBC's Michael Bloom contributed reporting.

SunTrust initiated coverage on Biogen and Amgen on Tuesday, rating each stock as a buy based on solid drug pipelines and growth opportunities in China.

SunTrust's bullish thesis on Biogen is based on the company's Alzheimer's drug aducanumab. In October the company said it was once again seeking regulatory approval for the drug, which would be the first of its kind in the billion-dollar Alzheimer's market.

SunTrust also points to Biogen's strength in biosimilars, which are generic versions of biologic medicines used to treat illnesses like cancer and autoimmune diseases, as well as growth opportunities in China.