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Biotechnology stocks and major pharma stocks haven’t quite recovered since Hillary Clinton took the industry to task a little over a year ago.
The iShares NASDAQ Biotechnology Index ETF (NASDAQ: IBB) is still off more than 12.5% in 2016, while the S&P 500 is up 5%.
A year ago, candidate Clinton targeted drug companies, calling them out for “price gouging” after a price scandal involving Turing Pharmaceuticals. Many biotech issues sank following the remarks.
Now, the drug companies are in something of a “no man’s land,” waiting to see just what comes of the election.
Gilead Sciences (NASDAQ: GILD), Incyt (NASDAQ: INCY) and BioMarin Pharmaceutical (NASDAQ: BMRN) are all down more than 25% over the last year.
With the election drawing closer and the first presidential debate next week, major pharmaceutical stocks are once again in focus. However, this time it’s more about buying opportunities among bargain pharma stocks.
Pharma Stocks to Buy: Allergan (NYSE: AGN)
Allergan is one of the biggest pharma stocks around, trading with a near $100 billion market cap. Shares have fallen 17% in the last year,and some activist investors have also taken notice of the fallout. Most notably, Carl Icahn has taken an interest in Allergan. He owns just under 1% of the pharma giant after taking a new position last quarter.
Allergan is looking to extend its footprint now that it’s raised some cash. It sold its generic business to Teva Pharma (NYSE: TEVA) for $40.5 billion, which will give it a 10% stake in Teva. That deal gives Allergan over $30 billion to spend on buybacks and growth acquisitions. It’ll be interesting to see what Allergan can do with this new growth capital.
Pharma Stocks to Buy: Mylan (NASDAQ: MYL)
Mylan has been caught up in a pricing scandal that’s rocked the stock. Shares are down nearly 25% in 2016 as controversy mounted about the pricing of Mylan’s EpiPen.
Mylan has spent plenty of money building up its EpiPen brand, which is the only solution for those with food allergies. EpiPen prescriptions for the month of August were at three-year highs.
The slide in Mylan’s stock price has made it of the cheapest drug stocks around; the stock trades at just seen times next year’s earnings estimates. Mylan has over 1,000 drugs in its arsenel and makes plenty of money outside of the EpiPen.
Now trading at $40 a share, Mylan is too cheap to ignore. Don’t forget that Teva Pharma tried buy Mylan for $80 a share last year.
Pharma Stocks to Buy: Perrigo (NYSE: PRGO)
It’s somewhat apropos that Perrigo makes our list pharma stocks to buy before the U.S. presidential election, as it was targeted by Mylan for a buyout. However, Perrigo rebuffed the takeout offers and is now one of the hardest-hit pharma stocks around. Its share price has fallen nearly 50% in the last year.
Activist investor Starboard Value recently revealed that it owns a 4.6% stake in Perrigo. The hedge fund has taken the pharma stock to task over operational missteps, including the fact that management’s promises have been woefully unfulfilled since the botched buyout.
The Ireland-based company trades at just 12 times next year’s earnings estimates and it does pay a 0.6% dividend yield as well.
The three drug companies above are key players in the health-care industry and their stocks are compelling buying opportunities right now while they linger at bargain prices.