Jeffries on Tasaro

Biotech ETFs: Still Riding High
The $8 billion iShares Nasdaq Biotechnology hit a 52-week high on Tuesday.
ByCrystal Kim June 20, 2017 12:21 p.m. ET
The biotechnology-stock rally continues. The SPDR S&P Biotech (XBI) and the iShares Nasdaq Biotechnology (IBB), among the highest-flying exchange-traded funds yesterday, both hit their 52-week highs on Tuesday.

The SPDR S&P has gained 2.7% while the iShares Nasdaq has climbed 2.3% so far.

Regeneron Pharmaceuticals (REGN), a top holding in both funds, is doing particularly well. Thank Piper Jaffray analyst Ed Tenthoff, who lifted his price target on the stock to $557 a share and sent shares flying to hit a new 52-week high. Regeneron isn't the only stock getting upgraded.

Morgan Stanley analyst Andrew Berens lifted his price target on Clovis Oncology (CLVS) to $93 from $79. That said, yesterday's rally is continuing into today and at a recent price of $89.62 implies an upside of less than 4%.

Berens sees more upside in Tesaro (TSRO), which has fallen nearly 3% so far today to around $139. Tesaro was dinged because its Zejula competes with Clovis' advanced ovarian cancer drug Rubraca, which garnered positive late-stage trial results. But Berens says the valuation gap between the two company stocks is too wide. He says investors shouldn't overlook Tesaro's development plan, intellectual property and value. Best approach: own both. Berens' 12-mo. price target of $183 implies upside of more than 30%.

Both the SPDR and iShares ETFs' underlying baskets carry Tesaro.

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crystal.kim@barrons.com • @crystalkimmm