Back away from the Four Horsemen? Are you nuts?
Some are questioning on Twitter (TWTR) whether the Biogen (BIIB) quarter miss this morning is enough to have me abandon ship on one of the key Four Horsemen: Biogen, Celgene (CELG), Gilead (GILD) and Regeneron (REGN) that I wrote about in Get Rich Carefully. While all of these stocks have appreciated well beyond when I was writing the book, the idea that an earnings miss from Biogen -- chiefly because of Tecfidera, an anti-MS formulation -- could have me back away from this company is ludicrous. I actually like it for its Alzheimer's possibilities, and while I don't deny disappointment in the MS drug's numbers, I can't abandon ship ahead of what might be one of the next big blockbusters.
Similarly, I see Celgene going higher off rumors that Bristol-Myers (BMY) might be buying it. I find this a little illogical -- they are about the same size! However, a merger of equals could make sense because they both have fabulous anti-cancer franchises. All that said, I like Celgene on earnings alone, especially when I hear about patent challenges against its key Revlimid drug. The patent seems pretty unassailable to me.
Gilead? I don't like additional competition coming into the hepatitis-C space, and that's what it has as of this morning when we learned that Merck's (MRK) got a new drug joining the fray to compete with Gilead and AbbVie (ABBV). That said, Gilead's got enough money from its initial monopoly off its miraculous blockbuster that it can reinvent itself and be worth a lot more than it's selling for, which is about half of the market multiple to the S&P 500.
Finally, there's Regeneron, which is rallying today because it turns out the company might have a revolutionary anti-muscular-aging compound, for which it just reported encouraging Phase 1 results. Now Phase 1 is really early. But who knew it was even working on this? That means it has a novel anti-cholesterol drug on the way, a potential anti-asthma drug and this, in addition to the amazing strength and superiority of its Eylea drug for macular degeneration of the eyes.
Now, one could argue that I am being piggish on all three. After all, I have been recommending Regeneron since it was at $5 and have been pushing Celgene forever and Gilead ever since we saw preliminary signs of the importance of its Pharmasset merger to its future. That's the company that produced its hep-C cure. Biogen's always seemed cheap to me, given its inventive nature and its amazing MS franchise, which isn't damaged in the least by the shortfall this morning, at least in my eyes. The Alzheimer's news did send the stock up 100 points, but I think it could go up huge again on any additional positive data.
So, I am sticking by the stocks of the Four Horsemen of the Big Pharma Apocalypse even up here. There's still too much upside to back down now.
