Biotech: A ?Stock Picker?s Delight,? Says Morgan Stanley

[Stocks-to-Watch]

Morgan Stanley analyst Marshall Urist (who sports an MD and a PhD after his name) surveyed biotech companies, and found few industry-wide catalysts. But smart stock pickers can find values in the sector, he argued.

Among biotech stocks, the large-cap group seems most fertile right now, he argued.

He picked three stocks worth buying: Biogen (BIIB), Celgene (CELG) and Gilead (GILD).

“Importantly, near term new products with margin leverage provide valuation support including Gilead’s QUAD, Biogen’s BG-12, and Celgene’s European approval for Revlimid in 1st line myeloma, to lower concerns about elevated near term P/E,” he wrote.

Gilead appears particularly well-poised to Outperform, Urist argued.

“Gilead offers 15-20% upside and the most attractive combination of fundamental positive drivers. Put another way, Gilead’s key valuation driver is long-term cash flow uncertainty due to HIV franchise (80% of revenue) patent expiries in the 2018-2021 period. 2012 events have the potential to meaningfully improve long-term cash flow visibility, driving multiple expansion and positive EPS revisions.”

Original Article Source by Barrons.com