I've compiled a list of predictions for the biotech sector in 2014.
My goal in coming up with these predictions for the next year was to think unconventionally (because that's where the most fun forecasts come from) but not go too crazy so that my guesses still have at least a half-decent shot at being right.
I'm also taking my predictions to ridiculous levels of precision, as you'll see, but I'll still declare victory with a 10% margin of error. Cut me some slack, please.
1. The launch of Gilead Sciences' (GILD) hepatitis C drug sofosbuvir will be tremendously strong in early 2014, propelling the company's market value past Merck. However, sofosbuvir's sales growth will slow later in the year, raising investor concerns about the sustainability of Gilead's hepatitis C drug franchise. Gilead will close 2014 basically unchanged but still squeaking out a 4.79% gain.
2. Merck (MRK) will be the best-performing Big Pharma company of 2014. Investors will flock to Merck because of the company's commitment to shareholder friendly actions, positive data from its immune-oncology franchise and BACE inhibitor, and stabilization of its Januvia franchise. Merck will end the year up 17.47%.
3. Mergers between large-cap biotech and drug companies will come back in vogue. At least two companies with market caps of $20 billion or more will be acquired in 2014. I predict Sanofi (SNY) will acquire Regeneron Pharmaceuticals (REGN) and Bristol-Myers Squibb (BMY) will buy Vertex Pharmaceuticals (VRTX).
4. An increasing focus on the high prices of orphan drugs, slowing revenue growth and a rich market valuation finally catches up with Alexion Pharma (ALXN), causing the stock to fall 11.43% in 2014 -- the most by any large-cap biotech stock. Alexion shares have enjoyed a nice ride higher over the past few years but in 2014 investors will find cheaper ways to buy growth in biotech.
5. With timelines for new data and approval pushed back, Sarepta Therapeutics (SRPT) takes a year sabbatical from being the poster child of biotech stock volatility, trading sideways in a range of $15.31 and $28.37 for most of the year. (Yes, a range of $13 per share, up or down, is sideways for this most volatile stock.)
6. Sangamo BioSciences (SGMO) will have a mirror-image year to Gilead. Early in 2014, investors will grow disenchanted with the HIV therapy program leading to weakness in the share price. The selling turns to buying in the back end of the year as gene therapy comes back into vogue and the Sangamo's monogenic drug program moves closer to the clinic. Sangamo ends 2014 with shares up 23.45%.
7. Bluebird Bio (BLUE) is another stock which will benefit from gene therapy catching fire in 2014. While clinical data will remain sparse, investors will still make early bets on speculation. Bluebird will end the year up 87.71%.
There you have them -- my predictions for 2014. Wish me luck.
Sobek is long Merck.