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Large-cap biotech companies seem poised to outperform in 2Q, says Oppenheimer analyst

Published: 12:20 15 Jun 2018 EDT

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Alexion recently reported stellar first-quarter earnings

Large-cap biotech companies are poised to outperform in the second quarter, with Gilead Sciences Inc (NASDAQ:GILD), Alexion Pharmaceuticals Inc (NASDAQ:ALXN) and Vertex Pharmaceuticals Inc (NASDAQ:VRTX) expected to lead the charge, forecasts Hartaj Singh, a widely-followed research analyst at Oppenheimer.

“We remain cautiously bullish on the sector, albeit with a stock-picking approach,” wrote Singh in his latest note to investors. “Now that we are within striking distance of 2Q18 biotech earnings starting in mid-July, large-cap fundamentals and sector sentiments are slowly but surely improving, in our view."

Drilling down to the details, Singh likes Gilead as its HIV drug Biktarvy and its blood cancer drug Yescarta, as well as its budding therapies for immunology and non-alcoholic steatohepatitis, are drawing interest. That makes the risk-reward in the second half of this year attractive, wrote Singh.

READ: Gilead’s 1Q earnings miss gets shares, but Oppenheimer analysts say not to worry

He’s also a fan of Alexion, which reported stellar first-quarter earnings this year. “We believe that Alexion will deliver another strong quarter, and with the stock trading at the bottom decile of its historical range, we wonder when the Street will start giving management credit for relentless execution,” Singh wrote.

Lastly, Vertex remains one of Singh’s favorite large-cap biotech names as it is likely to deliver strong second-quarter results and offer an update on its VX-659 drug study to treat cystic fibrosis.

Singh had previously pointed out back in March that expectations were too high for large-cap biotech companies heading into the first quarter’s earnings season. But his projections are now far rosier in some part because President Trump’s drug pricing plan, unveiled in late May, failed to create additional headwinds for the sector.

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