Large Cap Biopharmaceutical Stock Valuations After Correction
We previously summarized the Rayno Mid and Small Cap Portfolios for 2015, a good year despite the correction. With this post we summarized selected Sales and Earnings metrics (Source finviz.com) of important large cap biotech stocks for the purpose of analysis after the J.P. Morgan Healthcare Conference and after 2015 financial results. From tracking these metrics and 2016 guidance we hope to better understand biopharmaceutical valuation models, product pipelines and comparative growth potential for these large caps that underperformed in 2015.
Here are some key points to keep in mind for 2016 investing:
- The best performing stock in the Rayno Large Cap portfolio for 2015 was Regeneron (REGN) up 31% but has sold off 7.5% in 2016. The large cap weighted IBB was up 10.35% in 2015 and is down 9% for the first 4 days of 2016.
- In general large cap biotech stocks underperformed mid and small cap stocks in 2015. However with the current 2016 correction investors may become less speculative and more conservative seeking stocks with a strong balance sheet and earnings safety.
- During the peak bull market days of 2015 valuations were less of a concern and sales growth and product pipeline drove stocks. Momentum trading ruled.The bull market ended after the August/September correction and since the end of Q3 we have been in a bear market.
Preliminary metrics on sales and earnings looking for growth vs value:
| Company | Ticker | Price 1/7/16 | Market Cap | 2015 Rev | P/S | PEG | Q/Q Rev | EPS Q/Q | Stock Perform | |
| $B | Gr% | Gr% | %12 mos | |||||||
| Abbvie | ABBV | 57.21 | 93.52 | 21.9 | 4.27 | 1.86 | 18.4 | 138.7 | -13.17 | |
| Alexion | ALXN | 174.37 | 39.29 | 2.5 | 15.7 | 7.17 | 20.1 | -192 | -6.55 | |
| Amgen | AMGN | 152.98 | 115.4 | 21.46 | 5.38 | 1.81 | 13.8 | 51.6 | -4.32 | |
| Biogen | BIIB | 284.01 | 63.31 | 10.57 | 5.99 | 1.28 | 10.6 | 14.6 | -16.96 | |
| Bristol Myers | BMY | 65.27 | 108.92 | 16.53 | 6.59 | 3.22 | 3.8 | -2.3 | 9.71 | |
| Celgene | CELG | 111.89 | 87.91 | 8.78 | 10 | 2.36 | 17.8 | -106.6 | -1.44 | |
| Gilead Sci | GILD | 96.25 | 138.71 | 31.45 | 4.41 | 0.63 | 37.3 | 83.2 | 1.41 | |
| Regeneron | REGN | 501.96 | 52.24 | 3.81 | 13.72 | 4.55 | 56.7 | 154.9 | 22.38 | |
*BMY and CELG were not in the Rayno Life Science Portfolio in 2015
Technicals are broken on this major biotech ETF: