Morgan Stanley analyst Marshall Urist (who sports an MD and a PhD after his name) surveyed biotech companies, and found few industry-wide catalysts. But smart stock pickers can find values in the sector, he argued.
Among biotech stocks, the large-cap group seems most fertile right now, he argued.
He picked three stocks worth buying: Biogen (BIIB), Celgene (CELG) and Gilead (GILD).
“Importantly, near term new products with margin leverage provide valuation support including Gilead�s QUAD, Biogen�s BG-12, and Celgene�s European approval for Revlimid in 1st line myeloma, to lower concerns about elevated near term P/E,” he wrote.
Gilead appears particularly well-poised to Outperform, Urist argued.
“Gilead offers 15-20% upside and the most attractive combination of fundamental positive drivers. Put another way, Gilead�s key valuation driver is long-term cash flow uncertainty due to HIV franchise (80% of revenue) patent expiries in the 2018-2021 period. 2012 events have the potential to meaningfully improve long-term cash flow visibility, driving multiple expansion and positive EPS revisions.”
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