Which sub-sector of the biotech industry has the brightest outlook at this time?
It's hard to say which one sub-sector has the brightest outlook at this point of time. But we see great potential for molecular diagnostics. The diagnostics market has enjoyed a high growth in the past few years and we believe the sector will continue to grow at a high rate in the next few years thank to the breakthrough in genomics and proteomics. Also, personalized medicine has gained favor in the past few years and the trend will continue in the future. Diagnostics is a lucrative business and is less risky than therapeutic programs.
If you had to name your top two or three Buy recommendations, which stocks would they be?
My top three picks of biotech companies are BioMarin Pharmaceuticals Inc. (BMRN), Myriad Genetics (MYGN) and Regeneron (REGN).
We recommended BMRN in early August 2005 when its stock price was about $8 per share. We have been bullish about this stock ever since. Currently the stock trades at about $38 per share and we are still optimistic and expect further price appreciation. Our price target is $45 per share. BMRN develops therapeutics for genetic disorders and has three products on the market. The company has a decent pipeline and very strong cash position. Profitability is on track with an estimated EPS of $0.13 for 2008.
We recommended MYGN in early Feb 2006 at about $22 per share. We have been bullish about this stock ever since and current price is $49 per share. We are still bullish about this stock and our price target is $56 per share. MYGN has a different business model compared to that of BMRN. MYGN operates in two different segments: predictive medicine and therapeutics. Predictive medicine has been performing very well and has provided cash for its therapeutic programs. MYGN also has a decent pipeline and a very strong cash position. The company just signed good deal with Lundbeck A/S to market its phase III Alzheimer's candidate Flurizan in Europe.
We upgraded REGN in early November 2006 at about $22 per share. The stock price has been very volatile in the past year which is typical of a biotech company. Our buy call is based on the strong fundamentals of the company: decent pipeline with many late stage product candidates targeting large markets, strong cash position for long term growth strategy. The company's unique platform technology has attracted big pharmaceutical companies such as Bayer Healthcare and Sanofi-Aventis for partnerships.
