Post the 2016 debacle, the biotech space raised hopes with growing stability this year. However, the sector has been witnessing a correction since October. It has lost 10.4% so far in the fourth quarter of 2017 (Oct 1 to date). A major factor that resulted in this correction is the uncertainty surrounding the passing of the tax reform.
Last month, the biotech space picked up following the optimism brewing over the much-awaited Republican tax Bill, which has now reportedly garnered a sufficient support from the policymakers to enable it to be sanctioned next week. The tax reforms aim to reduce U.S. corporate tax rates from 35% to 21%.
The sector has witnessed a 2.1% increase in the last 30 days owing to the broader market recovery. The S&P 500 index is up 3.8% during the same time frame.
The proposed tax reforms, if approved, will leave more cash in the hands of drugs/biotech companies, which can be further invested in mergers/acquisitions. Notably, M&A activity has been relatively fewer this year compared with the last.
Although the broader market and the biotech sector have been treading on an uneven surface for the past couple of months, there are still quite a few hidden biotech treasures, which have witnessed positive estimate revisions during the period.
Earnings estimate revisions are the most powerful force impacting stock prices. Stocks with rising estimates, have significantly outperformed the S&P 500 index year after year. Hence, investors can take assurance from the stocks with northbound earnings estimates as those are most likely to outperform.
Here are two biotech stocks with positive estimate revisions being shown in the last 30 days.
Emergent BioSolutions, Inc. ( EBS Quick Quote EBS - Free Report)
Emergent BioSolutions has seen the Zacks Consensus Estimate for 2018 earnings per share being revised 11.5% upward to $2.42 over the last 30 days. This positive estimate revision was supported by last month's FDA approval for manufacturing its small pox vaccine, ACAM2000, at the new cGMP live viral manufacturing facility in Canton, MA, which the company has recently acquired. Notably, ACAM2000 is the only vaccine licensed by the FDA for active immunization against smallpox disease for people determined to be at high risk of the infection.
Moreover, this month, the company has been awarded with a contract by the Department of National Defence (DND) to deliver its anthrax vaccine, Anthrasil, to the Canadian government for treating inhalational anthrax. The company’s share price also rallied 22.2% in the last 30 days.
Miragen Therapeutics, Inc. MGEN
Miragen Therapeutics, a Colorado-based biopharmaceutical company has witnessed a positive estimate revision in the last month. The stock has seen the Zacks Consensus Estimate for its loss per share estimate being narrowed 13.9% from $1.66 to $1.43 for 2018 over the last 30 days. Shares of the company have also gained 5% during the period.
This upward estimate revision was driven by the encouraging data announced from a phase I study, evaluating its pipeline candidate MRG-106 for treating patients with the mycosis fungoides, a form of cutaneous T-cell lymphoma.
Data from the study showed that 64% of patients treated for more than a month demonstrated 50% or greater improvement in total skin disease. The company is also evaluating the candidate in other hematologic indications and plans to release interim data from these trials ahead in 2018.
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