Friday, August 28, 2015

Credit Suisse's 8 Pharmaceutical Stocks With 'Significant' Upside

NEW YORK (TheStreet) -- Pharmaceutical stocks were not immune to the recent market sell off, which means several stocks could present buying opportunities.
Credit Suisse (CB - Get Report) highlights eight stocks that have been beaten down that also have upcoming events that could drive their stock prices even higher.
"While the recent selloff has led to target prices for each of our companies suggesting significant upside, we focus on near-term catalysts that may offer provide investors with a more fundamental way to find upside," the Aug. 27 note said.
Check out Credit Suisse's stock picks, with ratings from TheStreet Ratings for added perspective.
TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.
Buying an S&P 500 stock that TheStreet Ratings rated a "buy" yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a "buy" yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.
BMY Chart BMY data by YCharts 
1. Bristol-Myers Squibb Co. (BMY - Get Report) 
Credit Suisse Rating, Target Price: Outperform, $78
Potential Stock Upside: 28%
Upcoming Catalyst: Much of the focus on BMY has been around the Opdivo+Yervoy data in 1st line NSCLC to be presented at WCLC on Sept 7th. Our recent conversations with the company reflect continued confidence in this combination, suggesting possible upside coming out of WCLC, although the reaction will likely be impacted by other data at the conference, including additional data from Roche on atezolizumab (PD-L1) plus standard chemotherapy in the 1st line NSCLC setting. We also expect stronger uptake for Opdivo on the commercial side in 2H 2015 than what was seen in 1H given the full impact of the squamous NSCLC approval in early March and the positive data seen in the non-squamous setting since then.
TheStreet Rating: Hold, C
TheStreet Said: TheStreet Ratings team rates BRISTOL-MYERS SQUIBB CO as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate BRISTOL-MYERS SQUIBB CO (BMY) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
  • The revenue growth came in higher than the industry average of 7.0%. Since the same quarter one year prior, revenues slightly increased by 7.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The current debt-to-equity ratio, 0.49, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.08, which illustrates the ability to avoid short-term cash problems.
  • The gross profit margin for BRISTOL-MYERS SQUIBB CO is currently very high, coming in at 80.33%. Regardless of BMY's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, BMY's net profit margin of -3.12% significantly underperformed when compared to the industry average.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. When compared to other companies in the Pharmaceuticals industry and the overall market, BRISTOL-MYERS SQUIBB CO's return on equity is below that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to $71.00 million or 93.27% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
PFE Chart PFE data by YCharts 
2. Pfizer Inc. (PFE - Get Report) 
Credit Suisse Rating, Target Price: Outperform, $40
Potential Stock Upside: 20%
Upcoming Catalyst: For PFE, close of the Hospira deal (on or around Sept 3) will then shift full focus to PFE's next efforts on the business development side, but the uptake of Ibrance provides a more concrete reason for near-term upside and this should be further boosted by what we expect to be positive data from the PALOMA-2 study (expected completion in Oct 2015 based on ct.gov).
TheStreet Rating: Buy, A-
TheStreet Said: TheStreet Ratings team rates PFIZER INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate PFIZER INC (PFE) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, solid stock price performance, good cash flow from operations and expanding profit margins. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
  • The current debt-to-equity ratio, 0.53, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, PFE has a quick ratio of 1.62, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Net operating cash flow has remained constant at $4,090.00 million with no significant change when compared to the same quarter last year. Along with maintaining stable cash flow from operations, the firm exceeded the industry average cash flow growth rate of -10.37%.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The gross profit margin for PFIZER INC is currently very high, coming in at 84.72%. Regardless of PFE's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PFE's net profit margin of 22.16% compares favorably to the industry average.

LLY Chart LLY data by YCharts 
3. Eli Lilly & Co. (LLY - Get Report) Credit Suisse Rating, Target Price: Neutral, $89
Potential Stock Upside: 6%
Upcoming Catalyst: LLY will present the full data from the EMPA-REG OUTCOME study at EASD on Sept 17 and further dissemination of this positive data should allow for a significant boost in the uptake of their SGLT- 2 inhibitor Jardiance.
TheStreet Rating: Buy, B
TheStreet Said: TheStreet Ratings team rates LILLY (ELI) & CO as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate LILLY (ELI) & CO (LLY) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins and solid stock price performance. We feel its strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
  • LLY's revenue growth has slightly outpaced the industry average of 7.0%. Since the same quarter one year prior, revenues slightly increased by 0.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The current debt-to-equity ratio, 0.55, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.01, which illustrates the ability to avoid short-term cash problems.
  • The gross profit margin for LILLY (ELI) & CO is currently very high, coming in at 84.30%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 12.06% trails the industry average.
  • Compared to its closing price of one year ago, LLY's share price has jumped by 40.83%, exceeding the performance of the broader market during that same time frame. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • LILLY (ELI) & CO's earnings per share declined by 17.6% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, LILLY (ELI) & CO reported lower earnings of $2.23 versus $4.31 in the prior year. This year, the market expects an improvement in earnings ($3.28 versus $2.23).

MRK Chart MRK data by YCharts 
4. Merck & Co. (MRK - Get Report) Credit Suisse Rating, Target Price: Neutral, $61
Potential Stock Upside: 11%
Upcoming Catalyst: MRK's Januvia franchise will likely feel pressure from the positive EMPA-REG OUTCOME data but we expect MRK to get a boost from FDA approval of Keytruda in 2nd line NSCLC soon (FDA action date Oct 2) and its HCV doublet grazoprevir/elbasvir by early next year (FDA action date Jan 28).
TheStreet Rating: Buy, B+
TheStreet Said: TheStreet Ratings team rates MERCK & CO as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:
"We rate MERCK & CO (MRK) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, notable return on equity, reasonable valuation levels, good cash flow from operations and expanding profit margins. We feel its strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
  • The current debt-to-equity ratio, 0.57, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.02, which illustrates the ability to avoid short-term cash problems.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Pharmaceuticals industry and the overall market, MERCK & CO's return on equity exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has increased to $2,585.00 million or 11.66% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -10.37%.
  • The gross profit margin for MERCK & CO is currently very high, coming in at 79.15%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 7.01% trails the industry average.

ALKS Chart ALKS data by YCharts 
5. Alkermes Plc (ALKS) Credit Suisse Rating, Target Price: Outperform, $77
Potential Stock Upside: 26%
Upcoming Catalyst: We expect ALKS to obtain FDA approval for Aristada following what we believe will be a brief delay after the initial Aug 22 action date and then focus should shift to phase 3 data readouts for ALKS 5461 starting in 1Q 2016.
TheStreet Rating: Sell, D+
TheStreet Said: TheStreet Ratings team rates ALKERMES PLC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
"We rate ALKERMES PLC (ALKS) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity and weak operating cash flow. "
Highlights from the analysis by TheStreet Ratings Team goes as follows:
  • ALKERMES PLC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, ALKERMES PLC swung to a loss, reporting -$0.22 versus $0.13 in the prior year. For the next year, the market is expecting a contraction of 86.4% in earnings (-$0.41 versus -$0.22).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Biotechnology industry. The net income has significantly decreased by 1334.5% when compared to the same quarter one year ago, falling from $3.74 million to -$46.11 million.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Biotechnology industry and the overall market, ALKERMES PLC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$15.41 million or 275.52% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • ALKS, with its decline in revenue, slightly underperformed the industry average of 8.4%. Since the same quarter one year prior, revenues slightly dropped by 1.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
GLPG Chart GLPG data by YCharts 
6. Galapagos NV (GLPG) Credit Suisse Rating, Target Price: Outperform, Euro 62 ($69.27)
Potential Stock Upside: 26%
Upcoming Catalyst: For GLPG, we remain confident that ABBV will inlicense filgotinib in early October based on the encouraging phase 2b data that filgotinib has delivered to date, while the company should also have phase 1 data on their CFTR potentiator GLPG1837 and start clinical work on the second corrector for the cystic fibrosis franchise in the coming months.
TheStreet Rating: not rated



PTLA Chart PTLA data by YCharts 

7. Portola Pharmaceuticals Inc. (PTLA) Credit Suisse Rating, Target Price: Outperform, $58
Potential Stock Upside: 22%
Upcoming Catalyst: PTLA will be releasing additional phase 3 andexanet alfa this year ahead of the top-line data release for betrixaban in the APEX study early next year, while the Analyst Day in November will provide an opportunity for investors to understand the company's manufacturing strategy for the andexanet alfa.
TheStreet Rating: Sell, D+
TheStreet Said: TheStreet Ratings team rates PORTOLA PHARMACEUTICALS INC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
"We rate PORTOLA PHARMACEUTICALS INC (PTLA) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity and weak operating cash flow. "
Highlights from the analysis by TheStreet Ratings Team goes as follows:
  • PORTOLA PHARMACEUTICALS INC's earnings per share declined by 47.4% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, PORTOLA PHARMACEUTICALS INC reported poor results of -$3.19 versus -$1.80 in the prior year. For the next year, the market is expecting a contraction of 40.4% in earnings (-$4.48 versus -$3.19).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Biotechnology industry. The net income has significantly decreased by 86.0% when compared to the same quarter one year ago, falling from -$31.35 million to -$58.33 million.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Biotechnology industry and the overall market, PORTOLA PHARMACEUTICALS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$48.77 million or 143.91% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • PTLA, with its decline in revenue, slightly underperformed the industry average of 8.4%. Since the same quarter one year prior, revenues slightly dropped by 1.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
ALDR Chart ALDR data by YCharts 
8. Alder BioPharmaceuticals Inc. (ALDR) Credit Suisse Rating, Target Price: Outperform, $50
Potential Stock Upside: 29%
Upcoming Catalyst: Phase 1b data for subQ quarterly in frequent migraines (timing: 3Q/4Q 2015); Phase 2b data in chronic migraines for ALD403 (timing: 4Q15).
TheStreet Rating: not rated

By Laurie Kulikowski

Source: http://www.thestreet.com/story/13270312/1/credit-suisses-8-pharmaceutical-stocks-with-significant-upside.html?kval=dontmiss


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