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JPMorgan has listed its top picks for a variety of sectors, including a number of divisions in the life science arena. Here’s a brief overview of some of the companies it likes.
As 2014 draws to a close, investors are no doubt wondering how best to boost their portfolios in the new year. Fortunately for those interested in the life science space, JPMorgan Chase & Co. (NYSE:JPM) recently released a report that includes quite a selection of picks.
Here’s a quick look at some of the firm’s top choices and why it likes them.
Biotechnology
JPMorgan has a good feeling about biotechnology, and states in its report that the sector is capping off its “fourth straight year of significant outperformance.” While some might be wondering if that good luck can continue, the firm seems confident that it will, and notes, “fundamentals still look strong, and we remain generally constructive on the sector heading into 2015.”
In terms of what stocks JPMorgan is interested in, it names BioMarin Pharmaceutical (NASDAQ:BMRN) as one of its top choices, noting that the company has “an established and growing commercial portfolio, a broad and compelling late-stage pipeline, and an orphan disease focus.” It’s also excited about the news the company is likely to put out this coming year.
In the small- to mid-cap range, the firm is a fan of Alexion Pharmaceuticals (NASDAQ:ALXN) as it believes “there are upside levers to [its] core commercial business.” In 2015 JPMorgan expects to see the company focus on launching its second product, asfotase alfa for hypophophatasia. It also likes Jazz Pharmaceuticals (NASDAQ:JAZZ), which it sees as “well positioned both from an organic growth and acquisition standpoint.” At the moment Jazz is focused on Xyrem, which is used to treat narcolepsy, but JPMorgan expects it to diversify away from that in the coming years.
Life science tools and diagnostics
According to JPMorgan, most of the stocks it covers in this sector took a “brief breather” in September and early October before resuming an “upward trajectory, driving an across-the-board increase in multiples to near multi-year highs.” As a result, the firm sees 2015 equity performance being spurred mainly by estimate revisions, making “company-specific drivers and secular head/tailwinds” important.
Its favorite company in the space is Illumina (NASDAQ:ILMN), whose focus is on developing technology and kits for use in genetic research. Its positive qualities include a “consistent history of strong execution and little competition in the near term.”
Medical supplies and devices
This area of the life science space had a strong 2014, JPMorgan states, as “[f]undamentals improved for the second consecutive year.” One of the firm’s top picks is Spectranetics (NASDAQ:SPNC), which it sees as a “compelling growth acceleration story.” Specifically, JPMorgan notes that the company’s peripheral atherectomy business is well positioned and sees the company’s acquisition of Covidien’s (NYSE:COV) drug-coated balloon program as a “long-term positive.”
JPMorgan also likes Medtronic (NYSE:MDT), which is believes is a “more durable asset” following its acquisition of Covidien. Medtronic is focused on treating chronic disease.
Major pharmaceuticals
In terms of major pharmaceuticals, JPMorgan sees opportunities connected to “pipeline updates and product launches.” It believes the most significant pipeline opportunity is represented by Bristol-Myers Squibb (NYSE:BMY), which it sees as “a clear leader in the market from both a time-t0-market and breadth of clinical program perspective.” It recommends investors watch for interim looks at the company’s -017 and -057 studies early in 2015.
Specialty pharmaceuticals
Looking at specialty pharmaceuticals, the firm predicts that a theme for 2015 will be consolidation, though there will likely be some expansion as well. With that in mind, JPMorgan’s top pick for the sector is Valeant Pharmaceuticals International (TSX:VRX,NYSE:VRX). It believes the company’s hostile bid for Allergan (NYSE:AGN) has been depressing its valuation and thinks there is thus “an opportunity for a multiple re-rating.”
JPMorgan also sees “an attractive growth story ahead” for Perrigo Company (NYSE:PRGO), a global healthcare supplier.
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
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Life Science Outlook 2015: Get Set for Innovation, Idea Sharing and Increased Funding