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Thursday, Bernstein analysts assessed the impact of the U.S. Food and Drug Administration (FDA) job reductions on the biotechnology sector, expressing concern over future drug approvals. The recent downsizing at the FDA, which reportedly includes approximately 3,500 employees, equating to around 20% of its workforce, has raised questions about the agency's capacity to maintain its drug approval processes. This regulatory uncertainty has particularly impacted biotech stocks, with InvestingPro data showing significant market reactions across the sector.
Bernstein's analysis, which draws on historical FDA data regarding budget, headcount, workload, and productivity, suggests that the FDA is unlikely to manage these cuts without significantly affecting annual drug approvals. This is despite the substantial funding the FDA receives from industry user fees through the Prescription Drug User Fee Act (PDUFA) program.
In light of this regulatory uncertainty, Bernstein recommends that investors should prefer more mature, commercial-stage biotechnology companies, particularly those that are not facing imminent regulatory decisions. The firm identifies ALNY and BMRN as top picks in this category, with REGN also highlighted as a strong contender, albeit with some risks due to upcoming oncology-related regulatory decisions.
BEAM and BHVN, while still rated as Outperform by Bernstein, are considered the most vulnerable due to regulatory uncertainties. BEAM faces uncertainty regarding Accelerated Approval (AA) for Alpha-1 Antitrypsin Deficiency (AATD), and BHVN is approaching a priority review Prescription Drug User Fee Act (PDUFA) date for Spinocerebellar Ataxia (SCA). According to InvestingPro data, BHVN's stock has declined over 63% in the past six months, with analysts maintaining a strong buy consensus and setting price targets significantly above current levels. The company's next earnings report is due on May 9, which could provide crucial updates on their cash position. InvestingPro analysis indicates the stock is currently undervalued, with 12 additional ProTips available for subscribers.
The recent exodus of senior FDA leaders, including Peter Marks and Peter Stein, coupled with broader job cuts within the Department of Health and Human Services (HHS), has put the agency in a precarious position according to Bernstein. The firm's analysis indicates a challenging period ahead for the FDA, which may, in turn, affect companies reliant on the drug approval pipeline. For detailed analysis of biotech companies navigating these regulatory challenges, including comprehensive financial health scores and Fair Value estimates, investors can access in-depth Pro Research Reports available on InvestingPro.
In other recent news, Biohaven Pharmaceutical (TADAWUL:2070) Holding has been the focus of multiple analyst reports, reflecting varied perspectives on its financial outlook and drug development progress. Piper Sandler maintained an Overweight rating with a $76 price target, citing confidence in Biohaven's pipeline, particularly the promising results from the IgG degrader platform, BHV-1300. Meanwhile, Morgan Stanley (NYSE:MS) adjusted its price target from $69 to $63, following a review of Biohaven's fourth-quarter performance and financial disclosures, but retained its Overweight rating due to the anticipated FDA decision on Troriluzole for Spinocerebellar Ataxia.
H.C. Wainwright reaffirmed a Buy rating with a $54 target, applauding BHV-1300's Phase 1 study results that showed an 84% reduction in IgG. Jefferies also reduced its price target to $63 while maintaining a Buy rating, noting concerns about BHV-1300's dosing but recognizing its potential in the immunology sector. TD Cowen held a Buy rating with a $75 target, highlighting the significant progress of BHV-1300, which demonstrated an 80-84% reduction in IgG.
Biohaven's efforts in advancing its clinical programs, particularly with BHV-1300, have been a focal point for analysts, with many expressing optimism about the drug's potential. The company's focus on addressing significant medical needs through its diverse pipeline continues to attract investor interest, as reflected in the recent analyst ratings and price targets.
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