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Barry Cohen
Barry Cohen
Articles (213) 

Jeffries Rates IGM Biosciences a Buy in Health Care Sector

Analysts also positive on Charles River, Gilead and Horizon Therapeutics

IGM Biosciences, Inc. (IGMS) is one of four health care stocks Jeffries thinks are good buys at the moment, especially for the investor with a higher risk tolerance, according to an article in 24/7 Wall Street.

Given the boost the stock has enjoyed since the brokerage's report came out on Sept.15, shares of the Mountain View, California-based biotech might seem better suited for investors who also have a long-term horizon.

IGM's stock price is up 375% since the company went public a little more than a year ago. It has traded as high as $90 during the past 12 months but has since eased to about $76, dropping nearly $6 on Sept. 23 when the Dow plummeted more than 500 points. Even at its current price, shares are well above the Jeffries target price of $68, which is much lower than the Wall Stree consensus of more than $80.

IGM develops antibodies for treating cancer. The company's lead product candidate is a bispecific IgM antibody that is in phase 1 clinical trials. It is aimed at treating patients with B-cell lymphomas, which are blood cancers in the lymph nodes. While other programs for these indications include drugs from Regeneron Pharmaceuticals Inc. (REGN), Roche (RHHBY) and Genmab (GMAB), the market is sizeable. Jeffries estimates a combined 35,000 new cases for the two indications these drugs are targeting.

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IGM is also getting on the Covid-19 action. The company recently announced a collaboration with U.S.-based Atreca Inc. (BCEL) and Chinese firm BeiGene (BGNE) to develop novel IgM and IgA antibodies targeting SARS-CoV-2 for the potential treatment of the coronavirus, reported BioSpectrum Asia. The IGM IgM and IgA antibodies possess superior binding power and that could potentially attack the virus and provide therapy for respiratory diseases.

IGM has a market cap of more than $2.3 billion. In the quarter ended June 30, the company reported a net loss was $18.8 million, or $0.62 per share, compared with a net loss of $10.7 million, or $19.08 per share, for the same period in 2019.

Another of the four companies Jeffries tabbed is Charles River Laboratories International Inc. (CRL), a leading early-stage drug development contract research firm. Jeffries raised the price target on Charles Rivers to $254, $16 higher than the Wall Street consensus. It closed at $212.55 on Sept. 23.

The analysts also like the prospects for Gilead Sciences Inc. (GILD), pointing out the pharma giant is trading at only 9.46 times estimated 2020 earnings. Gilead made a huge move on Sept. 20, when it acquired Immunomedics (IMMU) for $21 billion, giving the company a foothold in the important market for solid tumors such as sarcomas, carcinomas and lymphomas.

Jefferies assigned Gilead a $78 price target, consistent will the Wall Street consensus and well above the company's closing price of about $63. Gilead pays an attractive dividend, yielding 4.2%.

Fourth on the Jeffries list is Horizon Therapeutics (HZNP), which analysts suggest is more suited for speculative investors. The Irish company provides treatments for rare and rheumatic diseases in the United States and internationally.

In January, Horizon's Tepezza was approved by the Food and Drug Administration, becoming the first medication for treating adults with thyroid eye disease, a rare condition in which the muscles and fatty tissues behind the eye become inflamed, causing the eyes to be pushed forward and bulge outwards. Jefferies likes the drug's potential.

In the past year, Horizon's shares have nearly tripled to just under $80. The Jeffries price objective is $90, $6 under the consensus estimate.

Disclosure: The author has a position in Gilead.

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About the author:

Barry Cohen
Barry Cohen has nearly 40 years experience in communications and marketing, the majority in senior positions at large international health care companies, including Abbott Laboratories and Bayer Inc.

He has contributed to a number of financial websites, writing primarily about the stocks of health care companies.

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