Mizuho’s Vamil Divan reveals his top biotech pick

AbbVie Inc (NYSE: ABBV) closed 2021 with a 25% gain in the stock price, and Mizuho’s senior biopharmaceuticals research analyst says 2022 will be another year of outperformance for the biotech giant.

Divan sees upside to $154 a share

According to Vamil Divan, AbbVie is his top biotech pick, which he rates at “buy” with a price target of $154 that represents more than 10% upside from here. On CNBC’s “The Exchange”, he said:

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AbbVie bought Allergan a couple years ago. Aesthetics is a big part of the company now. They also have a strong business in immunology, oncology, and neuroscience. So, we really like how it’s a nice diversified growth story that’s still trading at a significant discount.

The loss of Humira patent, as per Divan, is unlikely to be a headwind for the company as it has already secured other drives for growth, which will be sufficient for multiple expansion. Last month, Wells Fargo said ABBV could climb to $165 a share.

IBB is down close to 20% for the year

Biotech has had a rough start to the year, with the iShares Biotechnology ETF (IBB) down nearly 20% as of Friday morning. Elaborating on reasons why the biotech space has been losing interest since September 2021, he said:

We’ve seen questions on the FDA and some uncertainty around its approval process. There are questions on FTC; maybe it will take a better look at M&A in this space. For smaller biotech firms, the appeal is they’ll get acquired by one of the larger companies. If that goes away, it’s a problem.

The debate on drug pricing, he added, could be another reason why Biotech has been rather dull. Other names Divan likes in this sector include Biohaven, Karuna, and Alkermes.