While the rally from biotech stocks feels like it’s getting a little long in the tooth, a closer inspection of these names reveals there’s plenty more to be excited about … long-term as well as short-term.
Depending on the company in question, FDA approvals may be around the corner, a swing to a profit may be in the cards, or maybe there’s just plenty of assurance that a drug still has several years of life — and growth — ahead of it.
In fact, while most of these stocks have been moving upward for a while, many of them also look like stocks to buy here and now, with the best yet to come.
Here are eight of those names, in no particular order:
Biotech Stocks to Buy: Medivation (MDVN)
Owning biotech stocks solely for their M&A potential is a recipe for disappointment; experts predict 10 buyouts for every three that actually happen. However, if those companies also happen to be solid companies on their own, then they’re worth a shot.
That’s where Medivation (MDVN) comes into view.
MDVN is one of those rare stocks to buy based on the above reasons: It has a great product and pipeline, which makes it a good company on its own, and an attractive target for a suitor.
Medivation is the maker of a prostate cancer treatment called Xtandi. While Xtandi has proven itself on that front, the real potential of the drug — and the reason another player might be interested — is in the lateral expansion of approved indications for Xtandi. In fact, the drug is already in phase 2 trials as a therapy for breast cancer, but with more time, resources and funding, the sky’s the limit.
That being said, even if Medivation is never acquired and Xtandi never becomes more than a prostate cancer drug, that market still is projected to be worth more than $9 billion by 2021.
Biotech Stocks to Buy: Amgen (AMGN)
It may be cliché, but it’s cliché for a reason — Amgen (AMGN) is one of the few truly great biotech stocks to buy simply based on its size, clout and certainty that it’s going to be around for a long time.
It’s just a happy coincidence that the company is in the midst of a serious revenue ramp-up.
Those who know Amgen well will know that the company is actually rather concentrated … geographically as well as product-wise. More than three-quarters of its revenue comes from North America alone, and only seven drugs make up the bulk of its sales. Enbrel, for arthritis and other inflammatory condition, is the biggie. Neulasta, Epogen, Aranesp and Prolia are in the mix too.
It’s the pipeline, however, that really sets Amgen apart.
As of the latest look, the company has 12 phase 3 trials underway, including one of the much-ballyhooed Kyprolis. It also has six biosimilars in the works, and expects to introduce these generic-equivalent biologics in 2017.
In other words, the Amgen pump remains primed for many years’ worth of revenue flow.
Biotech Stocks to Buy: Anacor Pharmaceuticals (ANAC)
Anacor Pharmaceuticals (ANAC) may not be profitable yet, but give it time. It’s growing the top line (and shrinking its loss) rapidly now after winning the FDA’s approval of Kerydin for the treatment of — wait for it — toenail fungus.
Don’t laugh. There’s a little money in the admittedly distasteful market. The company believes Kerydin could reach annual sales of $1 billion at its peak.
It’s certainly off to a good start. Anacor drove only $20 million in sales in fiscal 2014 after receiving approval for Kerydin in the middle of the year. But it generated $15.2 million in revenue during the first quarter alone, and is projected to see $73.5 million in sales over the course of 2015.
That’s better, faster progress than most other biotech stocks can boast right now.
Throw in optimism after positive news on an eczema treatment, Chrisaborole, and ANAC is one of the top (along with one of the weirdest) stocks to buy among the market’s biotechs.
Biotech Stocks to Buy: Juno Therapeutics (JUNO)
It’s tough to get excited about biotech stocks that aren’t yet producing any revenue. Juno Therapeutics (JUNO) may be an exception to the norm, however.
At the heart of the opportunity is an cancer immunotherapy called CAR-T, which is short for chimeric antigen receptor T-cell therapy. In simplest terms, CAR-T therapy trains a patient’s own T-cells to recognize and attack specific cancers. The approach shows tremendous promise too. In its trials thus far, 89% of lymphoblastic leukemia patients saw total remission.
It’s certainly compelling enough for Celgene (CELG) to dive into, anyway.
Just last month, Celgene invested $1 billion of its own money in Juno, deepening a long-standing R&D relationship between the two organizations. Celgene also got some licensing rights as part of the deal. If Celgene sees enough there to make the commitment, JUNO has certainly earned its spot on our short list of stocks to buy.
Biotech Stocks to Buy: Regeneron Pharmaceuticals (REGN)
Regeneron Pharmaceuticals (REGN) isn’t a trade for the faint of heart, especially right now. It’s facing a key decision from the FDA regarding the anti-cholesterol drug it developed with Sanofi SA (SNY). Although the advisory panel recommended an approval of the drug (called Praluent) last month, the same panel also expressed reservations about the importance of the outcomes in trials of the drug measured.
So what’s REGN doing on a list of biotech stocks to buy?
Because the market doesn’t expect the worry to be an impasse to the FDA. And even if the Food & Drug Administration limits its usage on the label, it’s widely expected that further trials could lift that restriction and open the drug up to a wider market by 2017.
In the meantime, sales of Regeneron Pharmaceuticals’ macular generation drug Eylea continue to grow faster than most anyone may have anticipated. During Q1, year-over-year revenue for Eylea was up 51%.
The PDUFA date for Praluent is July 24.
Biotech Stocks to Buy: Tetraphase Pharmaceuticals (TTPH)
Tetraphase Pharmaceuticals (TTPH) is another one of those biotech stocks that’s trading more on its future potential than its present success. So, make the necessary mental adjustment.
That said, it’s probably worth the risk.
One drug in the pipeline makes TTPH a compelling possibility. The results from a phase 3 study of Eravacycline, for the treatment of complicated urinary tract infections, are due any day now, which would be the last of any updates. Barring anything unforeseen regarding the trial, the next step is a request for an approval of the drug.
To the extent it matters, SunTrust analysts believe Eravacycline has a 90% shot at being successful in meeting its phase 3 end goal, and further believes the drug could drive more than $1 billion in annual sales at its peak.
That’s why speculators should keep TTPH on a watchlist of potential stocks to buy if and when it looks like things are moving forward in a big way.
Biotech Stocks to Buy: Gilead Sciences (GILD)
Sometimes there’s a lot to be said for steadiness and reliability.
Enter Gilead Sciences (GILD). Gilead is admittedly concentrated in the HIV and hepatitis markets. When you’ve got a stable of drugs like Stribild, Truvada, Tybost and Vitekta, though, and have recently introduced Harvoni and Sovaldi as a therapy for hepatitis C, concentration isn’t entirely a bad thing. The company is now in its 10th straight year of rising revenue, with earnings growth almost as consistently impressive.
That being said, while Gilead does a great job of fending off competitors on its own turf, the buzz is it may be looking to pick a fight with other players on the cancer front. And with $10 billion in the bank, the company could certainly buy or develop something impressive.
Better still, with a trailing price-to-earnings ratio of only 12.9 and a forward-looking one of even less, there’s certainly no value-based impasse with GILD.
Biotech Stocks to Buy: Acorda Therapeutics (ACOR)
Acorda Therapeutics (ACOR) offers something that few other biotech stocks on this list offer: a blend of solid revenue from its currently marketed products, as well as potential explosive growth from its pipeline. In fact, ACOR is quietly in that sweet spot where revenue is on the verge reaching levels significant enough that margins are about to widen at a stunningly rapid pace.
Acorda Therapeutics makes Qutenza and Zanaflex capsules, but is perhaps best known for its multiple sclerosis drug Ampyra — a disease for which there’s an enormous opportunity. Ampyra was approved in 2010, and spurred immediate revenue growth that’s still not showing signs of slowing.
Its pipeline currently includes three phase 3 projects: a nasal spray for seizures, Dalfampridine as a treatment for post-stroke walking difficulty, and CVT-301, which is a treatment for Parkinson’s disease that many eyes are on after the drug produced measurable and rapid reductions in OFF episodes for Parkinson’s patients.
While at least something in the pipeline is sure to boost the top line in the foreseeable future, Acorda Therapeutics may not even need anything to pan out there to really wow investors and make it one of the market’s top stocks to buy. See, income is projected to grow from 58 cents per share this year to 93 cents per share next year. That’s impressive profit growth (due to scale) that few seem to see coming.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.