October was a difficult month for investors, who watched the S&P 500 Index’s swift 6.8% descent.
Leading technology companies dominated the alarming headlines (Amazon.com AMZN, -2.42% dropped 20%, and Netflix NFLX, -4.55% fell 19%). But digging further, the biotechnology subsector was down 13.4%.
That spells opportunities for long-term investors, which Michael Brush explained while looking at stock prices relative to Jefferies analyst Michael Yee’s estimated values of their product pipelines. You effectively can acquire product pipelines of great potential for next to nothing if you buy shares of Gilead Sciences GILD, -0.97% or Celgene CELG, -1.61% according to Brush.
So it may be useful to look at a summary of performance, valuations and analyst opinion for large-cap biotech companies.
According to the Global Industry Classification Standard (GICS) used by S&P Dow Jones Indices, there are only nine companies in the S&P 500 SPX, -0.92% biotechnology subsector. These include AbbVie, which FactSet places in their pharmaceuticals industry group. But FactSet includes three more S&P 500 companies in its biotechnology industry group: Agilent Technologies A, -0.77% Illumina ILMN, -3.03% and Nektar Therapeutics NKTR, -3.65% So that brings the list to 12 companies.
Here they are, sorted by how much they have declined since the end of September:
Total returns Company Ticker Sept. 28 through Nov. 6 2018 through Nov. 6 3 years 5 years 10 years Nektar Therapeutics NKTR, -3.65% -41% -40% 180% 285% 645% Celgene Corp. CELG, -1.61% -16% -28% -36% 4% 146% Illumina Inc. ILMN, -3.03% -12% 48% 107% 242% 1,065% Regeneron Pharmaceuticals Inc. REGN, -1.84% -11% -5% -36% 24% 1,931% Alexion Pharmaceuticals Inc. ALXN, -2.94% -11% 3% -28% 6% 529% AbbVie Inc. ABBV, +1.21% -11% -10% 46% 108% N/A Biogen Inc. BIIB, -0.26% -9% 1% 18% 46% 680% Vertex Pharmaceuticals Inc. VRTX, +0.16% -9% 17% 49% 180% 552% Gilead Sciences Inc. GILD, -0.97% -9% 0% -30% 14% 246% Amgen Inc. AMGN, -1.46% -8% 12% 29% 89% 297% Agilent Technologies Inc. A, -0.77% -6% -1% 78% 90% 360% Incyte Corp. INCY -1% -28% -32% 83% 1,618% Source: FactSet
You can click on the tickers for more information about each company, including news coverage, charts and financials.
There’s quite a bit of volatility in the year-to-date returns for the group. But the 10-year figures speak for themselves, with all but three beating the S&P 500’s 277% return over the same period.
With an emphasis on product development leading (hopefully) to rapid sales growth, price-to-earnings ratios for biotech companies do not always make for useful comparisons. Still, here they are, based on consensus earnings estimates for the next 12 months, in ascending order:
Company Ticker Forward P/E ratio Forward P/E ratio - Sept. 28 Celgene Corp. CELG, -1.61% 7.6 9.3 AbbVie Inc. ABBV, +1.21% 10.0 11.6 Gilead Sciences Inc. GILD, -0.97% 10.3 12.0 Biogen Inc. BIIB, -0.26% 11.5 12.9 Amgen Inc. AMGN, -1.46% 13.6 14.9 Alexion Pharmaceuticals Inc. ALXN, -2.94% 14.8 18.2 Regeneron Pharmaceuticals Inc. REGN, -1.84% 16.1 19.3 Agilent Technologies Inc. A, -0.77% 22.7 24.2 Vertex Pharmaceuticals Inc. VRTX, +0.16% 41.7 44.4 Illumina Inc. ILMN, -3.03% 53.3 65.7 Incyte Corp. INCY, -3.84% 70.0 72.2 Nektar Therapeutics NKTR, -3.65% N/A N/A Source: FactSet
There’s no forward P/E ratio for Nektar Therapeutics NKTR, -3.65% because the consensus estimate among analysts is for the company to post net losses totaling $2.34 a share over the next 12 months.
Here’s a summary of analyst opinion for the group, sorted by the percentage of “buy” or equivalent ratings among analysts polled by FactSet:
Company Ticker Share 'buy' ratings Share neutral ratings Share 'sell' ratings Closing price - Nov. 6 Consensus price target Implied 12-month upside potential Alexion Pharmaceuticals Inc. ALXN, -2.94% 90% 10% 0% $123.22 $165.05 34% Vertex Pharmaceuticals Inc. VRTX, +0.16% 84% 16% 0% $175.23 $199.68 14% Agilent Technologies Inc. A, -0.77% 80% 13% 7% $65.98 $77.43 17% Nektar Therapeutics NKTR, -3.65% 70% 30% 0% $36.08 $80.33 123% Biogen Inc. BIIB, -0.26% 70% 30% 0% $320.28 $392.42 23% Celgene Corp. CELG, -1.61% 67% 29% 4% $75.09 $109.26 46% Incyte Corp. INC, +0.43% 64% 36% 0% $68.53 $84.72 24% Illumina Inc. ILMN, -3.03% 62% 33% 5% $322.73 $353.67 10% Gilead Sciences Inc. GILD, -0.97% 52% 48% 0% $70.35 $86.06 22% Amgen Inc. AMGN, -1.46% 43% 57% 0% $190.75 $205.37 8% AbbVie Inc. ABBV, +1.21% 38% 48% 14% $83.66 $100.68 20% Regeneron Pharmaceuticals Inc. REGN, -1.84% 36% 60% 4% $357.61 $409.95 15% Source: FactSet
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