So far this year, the performance of the biotechnology index has been strong. So is there room for more growth in the sector? Mark Schoenebaum, managing director and senior research analyst at Deutsche Bank Securities, shared his stock picks and sector outlook.
In 2008, there were “massive outperformances in a horrible year” for the biotech sector, Schoenebaum told CNBC.
But in 2009, there was underperformance from the sector because President Obama took on health care reform, he continued:
“Biotechnology drugs are high-price drugs. As government got closer to health care, those price points looked less sustainable.”
This year, as the health care reform “doesn’t look real,” the price points look “more reasonable in long-term models,” said Schoenebaum.
Schoenebaum’s Recommendations:
Amgen —“I like it on valuation—they have a big pipeline drug, which is a little bit risky, but even without that pipeline drug, the stock is not terribly expensive,” he said.
“The event that could be massive this year is that in the second half of the year, there’s a trial on their drug Denosumab…It’s not in Street numbers, but it’s a $1 to $2 billion opportunity and the stock will be up quite a bit if that works.”
Gilead Sciences
Dendreon —"There’s one catalyst left for Dendreon this year—that’s getting FDA approval…I believe that the probability for approval is about 90 percent,” he said. “That’s a reasonable catalyst for the stock this year to push up another 20 percent or so and that should come May 1.”
Acorda Therapeutics —“The Street estimates are still a little bit low and I think they’re going to beat numbers over the next year or so.”
Schoenebaum recommended investors who are looking into the biotech sector to consider investing through ETFs or actively managed mutual funds.
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Disclosures:
Deutsche Bank Securities own shares and has clients who own shares of Amgen.
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