New Buy Ideas for 2020-Biopharma and MedTech
New Buy Idea –Glaukos (GKOS) for ophthalmic disease therapies
If you have been reading my recent posts I have been cautious on adding new positions since the JPMorgan Healthcare Conference. After the nice Q4 run-up it would seem prudent to let portfolio run while assessing upcoming earnings. That seemed to be a prudent call given last week’s weakness and today’s coronavirus fears. But biopharma stocks are holding up better in the market after the coronavirus fears. On Tuesday the IBB was up 1.06% to $117.32, the “risk-on” XBI was up 1.85% and the XLV up 0.495% to $102.18. Most of the biotech and medtech stocks we own are in the green for 2020. We particularly like the growth prospects for medtech area and have been looking for smaller cap stocks with unique product and technology prospects.. Use the iShares U.S. Medical Device (IHI) for sector tracking.
We want to add new 2020 picks over the next 2 months but for now look at Glaukos Corporation (GKOS), an ophthalmic medical technology and pharmaceutical Company with novel therapies for treatment of glaucoma, corneal disorders and retinal diseases. We heard the presentation at the J.P. Morgan Healthcare Conference and added the stock to our portfolio last week in the $57 range. The Company’s product pipeline includes the iStent micro bypass stent for insertion in conjunction for reduction of intraocular pressure in adult patients in mild-to-moderate open-angle glaucoma.
Recently the Company acquired Avedro, Inc.a complementary business for their corneal health franchises with bio-activated pharmaceutical solutions. The stock dipped from the 80s on the 8/19 announcement. Expect management to guide revenue for Avedro products in the $50M range and total Glaukos revenues in the $310-320M range, at the next conference call.
Glaukos new products are rolling out in 2020 so there is revenue and earnings risk because of new technology and competition. The stock is now near its 12 month low at $57.76 with a market cap of $2.06B. The stock is expensive even at these levels with a P/S of 9.14 and a loss of 0.53 per share. But QtQ revenues are growing at 33% and revenues should be the major tracking metric. We need two more quarters of revenue results to confirm growth prospects. Gross margin is 86%. Cash per share is $4.20, which should cover needs for 2020.
Ten analysts cover the stock according to Yahoo Finance with five strong buys and 5 buys for a 2.4 rating.
We will provide periodic updates on GKOS including earnings expected in early February.