Eli Lilly (LLY), Merck (MRK) and Allergan (AGN) stand to outperform broad pharma stocks in 2017, a Credit Suisse analyst said Monday, citing their strong pipelines and expected clinical data this year.
Merck stock closed down 1.5% at 64.15 on the stock market today. Shares of Allergan dipped 0.2% to 240.65, and Lilly finished 0.3% lower at 84.14. Drug stocks were down broadly, but stayed above their 50-day moving average.
Credit Suisse analyst Vamil Divan expects macro uncertainty to pressure drug stocks in the first half of 2017, continuing a trend that began in 2016 with the raucous election season. Drug stocks ended 2016 down 27%, though are up 2.3% since January.
Merck will outperform on Keytruda, its immuno-oncology drug, Divan said. Keytruda and similar drugs from Bristol-Myers Squibb (BMY) and Roche (RHHBY) teach a patient's immune system to identify tumor cells. The immune system then destroys cancer.
Keytruda goes head-to-head against Bristol-Myers Squibb's Opdivo in that both target a specific protein within the body. Merck is teaming up to test Keytruda with Incyte's (INCY) drug, epacadostat. Epacadostat targets another protein.
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Lilly's pipeline is now derisked, Divan wrote in a note to clients. He sees promise in diabetes drugs Jardiance and Trulicity, plaque psoriasis drug Talz, Lartruvo for soft tissue sarcoma, and baricitinib, a treatment for eczema.
Sentiment on Allergan is finally starting to thaw, he wrote. He cited further upside to the pipeline from new drugs like Linzess and Viberzi for irritable bowel syndrome, as well as Vraylar for bipolar disorder.
On the small- and midcap scene, Divan prefers Alder Biopharmaceuticals (ALDR), Corvus Pharmaceuticals (CRVS) and Aimmune Therapeutics (AIMT). Alder is working on a migraine medicine based on inhibiting a specific peptide within the body to eliminate migraines.
Corvus is an "underappreciated peer player," Divan said.
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