Salim Syed, Mizuho Americas managing director and senior analyst, joins the latest edition of Good Buy or Goodbye to discuss his top and bottom picks in the pharmaceutical industry.
Syed points to Enliven Therapeutics (ELVN) as his top pick, believing that its drugs in development are promising. He specifically highlights ELVN-001, which is for a type of blood cancer called CML. He explains, "What you would want with these particular products is that they don't have any sort of cardiovascular toxicity, and they just put out six-month or 24-week safety data, and it looked pretty clean."
He notes that CML has been growing, and that patients are living longer, meaning that they are on drugs for a longer time. "It's now a $14 billion global market. We think it's pretty feasible that a product like ELVN-001, even when you're talking about not getting the first line share, the drug that's prescribed first, but even the second drug after the first line, something in the order of 1 to 2 billion," he tells Yahoo Finance.
Syed continues, "It's like, well what sort of multiple would you like to put right on a $1-$2 billion revenue line? The stock is currently trading at a billion and change market cap. We think it's easy to start looking at this as more of a $2 billion, $3 billion story." However, one potential risk he highlights is that the drug is still in Phase I of trials, and if all goes to plan, it could hit the market in 2028.
On the other hand, Syed is bearish on Amgen (AMGN), believing that its intrinsic valuation remains difficult. He explains, "The stock is currently $330 or so. Most people, when they're looking at this on a DCF (discounted cash flow) basis, cannot get it that high and are nowhere close. It's more in the two hundreds, low two hundreds type range... So it has sort of run away from that intrinsic valuation."
He also notes that Phase II data for its weight-loss drug AMG 133 will be released soon, adding, "The company has thus far said the drug is differentiated. Nobody really knows what that means." Given how this drug performs, Syed believes the stock could either hit the $400 range or drop down to the $200 range, which he calls a "pretty big swing" for a large cap like Amgen.
With players like Eli Lilly (LLY) and Novo Nordisk (NVO) also dominating the weight-loss market, Syed explains it's unclear how AMG 133 will be able to compete.
Watch the video above to hear what Syed believes is an upside risk for Amgen.
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This post was written by Melanie Riehl