The research office expects the strong performance of biotech stocks to continue in 2021 and cites a French company representative of the sector among its favorite stocks.
After a strong year in 2020 for European health and biotech stocks (including at the tricolor level, in which investors have never been more interested), the sector should continue its performance in 2021. This is the conviction of Jefferies’ biotech team (four analysts, including three PhDs and one CFA, or financial analyst), which this week compiled a list of its favorite stocks.
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The optimism of the research department is based on four main factors
1) Reforms affecting the U.S. health care sector will surely be a major focus of the new administration. But in the immediate future, the fight against Covid-19 will remain the top priority, and the primary objective will be to expand/improve the coverage of the population. On the price of drugs, Jefferies believes rather in measures taken, not in a drastic reform to the point that would discourage innovation and research.
2) A regulatory context characterized by a pragmatic approach in terms of risk/benefit analysis and a desire to accelerate the availability of the most effective treatments to patients should lead to the approval of new drugs representing therapeutic breakthroughs, notably based on cell and gene therapies.
3) Consolidation of the sector in the form of complementary acquisitions (small players by larger ones) with the appropriate level of premiums, rather than through mega-mergers of already large healthcare players.
4) Reasonable valuations in Europe, especially compared to US peers, but also compared to other growth sectors, with most stocks still trading below the net present value calculated by Jefferies.
The biotech companies in the spotlight
“In the end, we believe that the real clinical benefits will always be rewarded and we expect the industry to continue to be driven by continuous innovation from small and mid caps,” summarized the research department. In this context, Jefferies prefers biotech companies with a portfolio of innovative candidates based on new technologies, capable of positioning themselves favorably in increasingly competitive markets. And among its preferred values is a tricolor biotech. “Our best choices are Lonza, Genmab, PureTech, Nanobiotix and Acacia,” notes Jefferies.
Its analysts advise in particular the purchase of the French nanomedicine pioneer. “We believe that enthusiasm for the NBTXR3 radio-enhancer will increase as a result of new data in leading indications, plus the potential to start a Phase 3 trial in head and neck cancer in the first half of the year. As a single injection treatment, fully compatible with standard radiotherapy protocols, NBTXR3 could be used in nearly 60% of cancers treated with X-rays,” the research department estimates. Its target for Nanobiotix is set at 20 euros.
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First published in BFM BOURSE, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
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