Clovis Oncology, FibroGen Are Key Biotech Names For Goldman Sachs

In a report published Sunday, Goldman Sachs analyst Terence Flynn discussed the biotech space, noting the sector's most commonly referenced index, the NASDAQ Biotechnology (INDEX: NBI) gained 28 percent year-to-date, drastically outperforming the S&P 500's 2 percent return over the same time period.

According to Flynn, the surge in the sector is attributed to the scarcity of growth, new product cycles and M&A activity. Looking forward to the near-term, the analyst stated that historically the second quarter is a "strong" quarter for large-cap biotech.

These are two stocks that are key biotech names for Goldman Sachs.

Adding Clovis Oncology To ‘Conviction List' On Pipeline Progress, M&A

Flynn added shares of Clovis Oncology Inc (NASDAQ: CLVS) to Goldman Sach's "Americas Conviction List" given the assumption that Rocilentinib (Roci) will be approved for a subset of lung cancer in the first quarter 2016. In the near-term, the company is "on track" to complete its regulatory filing Monday morning.

Flynn added that he is "confident" the company can successfully move Roci into the front-line setting, where a Phase 2/3 trial is ongoing. In addition, the analyst is projecting peak sales of $2 billion in 2018 ($2.8 billion unadjusted), which assumes a probability of success in the 70 to 90 percent range.

Shares remain Buy rated with a price target lowered to $110 from a previous $116 given dilution from the recent secondary.

Upgrading FibroGen To Buy Following Sell-Off

Flynn upgraded shares of FibroGen Inc (NASDAQ: FGEN) to Buy from Neutral with an unchanged $32 price target following the recent sell-off in shares which "does not appear tied to fundamentals."

FibroGen's lead asset, Roxadustat (Roxa) is an oral drug in Phase 3 development for the treatment of anemia due to chronic kidney disease. The analyst believes the drug has the potential to penetrate and expand the $8.6 billion injectable ESA market.

Flynn also pointed out the company is partnered with AstraZeneca plc (ADR) (NYSE: AZN) in the United States and China, and ASTELLAS PHARMA INC (OTC: ALPMY) for the European Union and Japanese regions. The partnerships offer "independent validation" of its novel mechanism of action.