3 Drugmakers to Have on the Radar

AbbVie Inc (ABBV), bluebird bio Inc (BLUE), and Merck & Co., Inc. (MRK) have been in the headlines recently

by Karee Venema

Published on Jan 16, 2015 at 1:30 PM
Updated on Apr 20, 2015 at 5:32 PM

Developments in the biotech industry have been stealing the spotlight in 2015, as evidenced by the big moves made by Cempra Inc (NASDAQ:CEMP), Minerva Neurosciences Inc (NASDAQ:NERV), and Pharmacyclics, Inc. (NASDAQ:PCYC) following their respective fundamental developments. This week, the industry remained front and center, as two major conferences were underway in San Francisco -- the Biotech Showcase 2015 and the J.P. Morgan Healthcare Conference. Drilling down on three names making waves in the sector are AbbVie Inc (NYSE:ABBV), bluebird bio Inc (NASDAQ:BLUE), and Merck & Co., Inc. (NYSE:MRK).

AbbVie Inc (NYSE:ABBV)

ABBV announced this morning the European Medicines Agency has approved the sale of its hepatitis C treatment -- nearly one month after the company signed an exclusive deal with Express Scripts Holding Company (NASDAQ:ESRX) to cover the drug. The stock is capitalizing on the news -- as well as a price-target hike to $73 from $69 at Barclays -- and was last seen 2% higher at $64.14. Longer term, shares of ABBV have tacked on more than 28% over the past 52 weeks, and hit a record peak of $70.76 in early December.

However, in the options pits, put buying has been popular in recent weeks, as evidenced by ABBV's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 2.41, which ranks just 2 percentage points from an annual bearish peak. Given the equity's year-over-year advance, a portion of this activity may be a result of shareholders protecting paper profits against any future downside.

bluebird bio Inc (NASDAQ:BLUE)

BLUE CEO Nick Leshly announced at the J.P. Morgan Healthcare Conference that the company is hoping to unveil big clinical data by the end of the year, including its sickle cell gene therapy treatment LentiGlobin. In December, the stock surged more than 72% in the session subsequent to news the drug showed strong promise in early trials, and since then, shares of BLUE have gone on to add an additional 17%. What's more, the shares hit their highest perch on record -- $106.23 -- on Wednesday, before easing back to their current perch at $96.75, just north of their 20-day moving average.

Not surprisingly, sentiment is skewed toward the bullish side. In the options pits, traders at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 2.39 calls for every put over the past 10 sessions. Elsewhere, all five analysts covering the shares maintain a "strong buy" rating on BLUE, while the average 12-month price target of $108.80 stands in uncharted territory.

Merck & Co., Inc. (NYSE:MRK)

MRK rallied to a 12-year high of $63.62 on Tuesday, after the company announced a cancer-drug collaboration with Eli Lilly and Co (NYSE:LLY) and a $50 million investment in Boston-based biotech Moderna Therapeutics. MRK also paid Moderna $50 million for the rights to use its messenger RNA technology to develop a handful of new treatments over the next three years.

The news has since been met with price-target hikes to $69 at Jefferies and to $64 at Barclays, although both brokerage firms reiterated the equivalent of a "hold" rating on the shares. Should the stock continue to add to its nearly 20% year-over-year gain, another round of bullish brokerage notes could be on the horizon. Of the 12 analysts covering the shares, six maintain a lackluster "hold" recommendation, compared to six "strong buys." Plus, the consensus 12-month price target of $64.48 is within striking distance of the equity's current perch at $62.48.


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