Barclays Analyst Sees Biotech FY15 EPS Growth Outstripping Market

The biotech sector's expected 2015 earnings growth of 19 percent will far outpace the broader market while drug reimbursement rates will remain healthy, an analyst said Tuesday.

Barclay's Geoffrey Meacham launched coverage on 10 large- and mid-cap companies in the sector and said the consensus growth forecast for the group is "very beatable."

Although reimbursements for pricey drugs "could get tougher" in 2015, Meacham said it "won't dramatically shape real-world demand."

AbbVie Inc's (NYSE: ABBV) recent deal to supply its hepatitis C drug at a discount through a major benefits manager burned Gilead Sciences, Inc. (NASDAQ: GILD), and is an example of what Meacham largely dismissed.

"At the end of the day, a less compelling product that is discounted is still a less compelling product," Meacham said.

The sector is coming off a strong year with the Nasdaq Biotech Index up 34 percent in 2014, versus 11 percent for the S&P 500.

Meacham said there's risk in 2015 that investors will rotate out of the sector, using gains to fund stock purchases in other sectors.

That scenario unfolded in 2009, when the sector underperformed the broader market.

But Meacham said 2009 featured looming healthcare reform, as well as regulatory uncertainties that have largely evaporated.

Meacham rolled out coverage with Overweight ratings on five companies in the sector, including Biogen Idec Inc (NASDAQ: BIIB) with a $425 target; Medivation Inc (NASDAQ: MDVN) at a $130 target; Gilead Sciences at $125; NPS Pharmaceuticals, Inc. (NASDAQ: NPSP) at $50 and Alexion Pharmaceuticals, Inc. (NASDAQ: ALXN) with a $225 target.

The analyst initiated Equal-Weight ratings on Vertex Pharmaceuticals Incorporated (NASDAQ: VRTX) with target of $120; Celgene Corporation (NASDAQ: CELG) at $120; Amgen, Inc. (NASDAQ: AMGN), $180; Regeneron Pharmaceuticals Inc (NASDAQ: REGN), $450 and United Therapeutics Corporation (NASDAQ: UTHR) with a target of $135.