Investors’ interest in biotechnology or biotech stocks increased significantly during the early days of the pandemic as the world was looking for drugs and vaccines that could contain the spread of COVID-19. However, investors’ focus has shifted away from biotech stocks this year following rapid vaccination drives and due to persistent macro challenges, including rising interest rates. We’ll discuss the prospects of Biogen (NASDAQ:BIIB), BioNTech (NASDAQ:BNTX), and Illumina (NASDAQ:ILMN) and use the TipRanks Stock Comparison tool to pick the biotech stock that could generate the maximum returns.
Stocks of emerging biotech companies are often considered risky due to the considerable time, resources, and uncertainty associated with drug development and approval. However, a higher risk is often associated with a higher return.
Biogen (BIIB) Stock
Biogen is focused on treating neurological diseases and related therapeutic adjacencies. Shares of this biotechnology firm have been under pressure due to the setbacks related to the company’s Alzheimer’s drug, Aduhelm. The drug stirred up controversy as several medical experts and doctors questioned its efficacy. Consequently, Aduhelm received a lackluster response.
Moreover, Medicare restricted coverage for Aduhelm to patients in clinical trials. Biogen announced in May that it plans to “substantially eliminate commercial infrastructure” for Aduhelm in order to reduce additional costs.
Biogen has now moved forward and is now relying on its second Alzheimer’s drug, Lecanemab, which is being jointly developed with Japanese firm Eisai Co., Ltd. (ESALY).
Biogen has also been under pressure as competition from generics and biosimilars is impacting sales of its key drugs. In the second quarter, the company’s revenue declined about 7% to $2.59 billion, and adjusted EPS fell 5.9% to $5.25. However, Biogen managed to beat analysts’ expectations. While the company raised its full-year outlook, investors continue to be concerned about the sales erosion faced by its key drugs like Tecfidera and Rituxan.
What is the Target Price for Biogen?
Following the Q2 print, Needham analyst Ami Fadia lowered the price target for Biogen stock to $250 from $262 but maintained a Buy rating. The analyst noted that while the company’s Q2 results were good, the growth ahead seems uncertain.
Fadia feels that Lecanemab’s Phase 3 readout, which is scheduled for this fall, should shed some light on the future of the drug. However, she considers the fall data readout as a high-risk, high-reward event, whose outcome will affect Biogen’s medium-term growth potential.
Overall, consensus among analysts is a Moderate Buy rating based on 10 Buys and nine Holds. At $239.88, the average Biogen price target implies 22.4% upside potential from current levels.
BioNTech (BNTX) Stock
The German biotech firm BioNTech shot to fame when its COVID-19 vaccine – Comirnaty, developed in collaboration with Pfizer (PFE), became the first to win the U.S. FDA’s (Food and Drug Administration) approval. However, waning demand for Comirnaty has impacted investor sentiment and dragged down BNTX stock.
BioNTech’s sales declined nearly 40% to €3.2 billion year-over-year in the second quarter. EPS also fell 40% to €6.45. The company noted that the dynamic nature of the pandemic is causing a re-phasing of vaccine orders, leading to top-line fluctuations.
While BioNTech expects such fluctuations to persist over the rest of the year, the company kept its COVID-19 vaccine revenue guidance intact in the range of €13 billion to €17 billion. Last week, the FDA authorized Pfizer-BioNTech’s COVID-19 booster shots that target the BA.4 and BA.5 Omicron subvariants, ahead of the government’s fall vaccination campaign. Furthermore, the U.K.’s medicine regulator has also approved Pfizer-BioNTech’s updated bivalent COVID-19 booster shot.
Is BNTX a Buy?
Following the Q2 results, Canaccord analyst William Maughan raised his price target for BNTX stock to $200 from $192 and reiterated a Buy rating. Maughan noted the development in BioNTech’s pipeline and expects incremental updates in the near future.
Recently, Cowen analyst Yaron Werber initiated coverage of BioNTech stock with a price target of $177. Werber feels that with the COVID-19 pandemic transitioning to the endemic phase, Comirnaty sales will decline and demand will be in line with the annual demand for flu vaccines.
Werber noted that while BioNtech has a solid pipeline of oncology treatments, it “requires validation and is still early in development.”
Overall, the Street has a Moderate Buy rating on BioNTech stock based on four Buys and six Holds. The average BioNTech stock price prediction of $211 implies 42.7% upside potential.
Illumina (ILMN) Stock
Illumina offers DNA sequencing and array-based solutions for genetic and genomic analysis. The company’s products have applications in numerous fields, including oncology, life sciences, agriculture, and reproductive health.
ILMN shares have plunged this year due to weak financial performance and the uncertainty associated with the company’s Grail acquisition. Illumina’s Q2 revenue grew 3% to $1.16 billion, while adjusted EPS declined nearly 70% to $0.57.
Illumina cited macro challenges, currency headwinds, and the impact of COVID-led shutdowns as the reasons for weak Q2 performance. The company now expects full-year revenue growth in the range of 4% to 5%, below its prior outlook of 14% to 16%. It also slashed its 2022 adjusted earnings outlook.
Regarding the Grail acquisition, last week, a U.S. administrative judge ruled in favor of Illumina, rejecting the Federal Trade Commission’s (FTC) position that the deal would impact competition in the multi-cancer early detection tests market. Illumina acquired Grail, a cancer-testing company, last year, despite the FTC’s objection.
Is ILMN a Buy, Hold, or Sell?
Bank of America analyst Derik de Bruin called the recent ruling in favor of Illumina an “unexpected” and “positive” headline. That said, the analyst highlighted that the EU jurisdiction case and the EU Phase 2 review related to the Grail acquisition continue to persist.
Bruin believes that a potential divestment of Grail would be “increasingly seen as a positive outcome” if the EU antitrust regulators do not decide in Illumina’s favor. Bruin maintains a Hold rating on Illumina stock.
All in all, the Street has a Hold consensus rating on Illumina stock based on four buys, eight Holds, and one Sell rating. The average ILMN price target of $256.67 implies upside potential of 30.9%.
Given macro as well as company-specific risks, Wall Street is cautiously optimistic about Biogen and BioNTech while they are on the sidelines when it comes to Illumina stock. Following a significant pullback, the Street estimates higher upside potential in BioNTech stock compared to the other two biotech stocks.