3 Biotech Stocks Still Attractive After Monday's Sell-Off

The biotech segment has been growing well surpassing all expectations until Monday when shares slipped significantly. The NASDAQ Biotechnology Index (^NBI) and NYSE ARCA BIOTECH INDEX (^BTK) had gained 16.7% and 18.7%, respectively, til April 24 but both declined more than 4% on Monday after disappointing news from several biotech companies.

Just when news of several mergers and acquisitions, product approvals, and positive pipeline updates were blooming in the biotech sector, several biotech companies saw their shares going down on April 27.

Celladon Corp.’s (CLDN - Snapshot Report) shares took a nosedive of 80.7% on Monday to end the day’s trading at $2.64 after announcing that its lead candidate, Mydicar, has failed to meet both the primary and secondary endpoints in the phase IIb CUPID2 study. The company is now evaluating its other pipeline programs.

Meanwhile, the FDA’s briefing documents regarding biotech major, Amgen’s (AMGN - Analyst Report), oncology candidate, talimogene laherparepvec, have led to concerns regarding the chances of the treatment gaining a favorable recommendation at the upcoming FDA advisory panel meeting. According to the briefing documents, the experimental melanoma treatment cannot be considered at this time for accelerated review.

Despite these setbacks, biotech remains a very happening corner of the investment world what with a flurry of merger & acquisition deals and product approvals. It would be a good idea to zero in on a handful of biotech stocks that are still looking attractive despite Monday’s fall.

Try These Positive Rank Stocks

Amgen, carrying a Zacks Rank #2 (Buy) and an attractive Value Style Score of ‘B’, is still a great pick for biotech investors. Shares of Amgen were down around 3.3% to $162.38 on Monday on the FDA’s briefing documents.

However, this Thousand Oaks, CA-based company posted encouraging results last week with earnings beating our expectations on the back of strong sales of products like Enbrel, Epogen, Sensipar, Prolia and Xgeva. These products are expected to do well in the coming quarters as well.

The company also raised its earnings guidance to the range of $9.35—$9.65 per share on total revenues of $20.9–$21.3 billion (old guidance: $9.05–$9.40 per share on total revenues of $20.8–$21.3 billion). The company also has several important regulatory decisions pending this year. Positive outcomes from these will boost the stock.

Another attractive stock, Biogen (BIIB - Analyst Report), declined more than 3% on Apr 27 to end the day’s trading at $389.27. Biogen, carrying a Zacks Rank #1 (Strong Buy) and an attractive Growth Style Score of ‘B,’ can be a biotech investors’ pick in the long run.

The Cambridge, MA-based biotechnology company missed our expectations last week when it reported first-quarter earnings. However, the company’s newly launched products Plegridy, Eloctate and Alprolix have performed well in the first quarter and are expected to do so in the coming quarters as well. Biogen is also awaiting important regulatory decisions, positive outcomes from which will drive growth.

Alnylam Pharmaceuticals, Inc. (ALNY - Analyst Report), a Zacks Rank #2 (Buy) stock with an attractive Growth Style Score of ‘B,’ also slipped around 8.9% on Monday. The Cambridge, MA-based company boasts of an attractive pipeline based on a biological pathway known as RNA (ribo nucleic acid) interference (RNAi).

The company has several pipeline candidates in its portfolio as well as partnerships with big names in the health care sector. The successful development of these candidates will drive growth at the company.

What's Ahead?

Pricing competition in the highly lucrative HCV market and development in the biosimilar market are expected to be the key focus in the near future. However, the usual story of mergers and acquisitions, important regulatory updates and pipeline decisions may also attract investor attention. Though the biotech segment is expected to remain volatile in the days to come, it is represents an attractive investment options.

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