The SPDR S&P Biotech ETF (XBI) performed well during and immediately after the recent JP Morgan conference, which often sets the tone for the start to the year and could signal the potential for further gains in the months ahead, says John McCamant, biotech expert and editor of The Medical Technology Stock Letter.
Indeed, after the biotech beat down in 2022, it is nice to see the group deliver mostly positive news flow and outlooks with premium buyouts adding to our cautious optimism for biotechs in 2023. The group bounced with the January effect (tax loss pressure in December disappears in January). Less short pressure has also helped the biotechs as well as a dearth of IPOs.
One company we like is Esperion Therapeutics Inc. (ESPR). ESPR will complete global regulatory filings in 1H23 that will seek to expand the Nexletol/Nexlizet label (in the U.S. and Europe) to include the MACE benefit from the positive CLEAR Outcomes trial results. In our view, the expansion of the Nexletol/Nexlizet label in both the U.S. and Europe will lead to significant sales growth.
ESPR also expects that results of the CLEAR Outcomes trial, which will be announced March 4th at the American College of Cardiology (ACC) meeting, will trigger significant non-dilutive partner milestone payments of $450 million. $300 million will come from EU-partner Daiichi Sankyo and $150 million from Japanese partner Otsuka in milestones tied to label expansion stemming from the CLEAR Outcomes trial results.
Recommended action: ESPR is a BUY under $10 with a target price of $25.
