I’ve been a fan of the biotech industry for quite some time, and I continue to like it today. These stocks are so exciting, not just because of the advancements being made, but also because a catalyst can strike at any moment. Any company with a drug in the clinical pipeline can make headlines on any day of the week in any market environment, and with many of these companies not yet earnings stories, odds are good those headlines will have a bigger material impact on the stock than quarterly results.
There’s a lot going on in biotech right now, which means there are plenty of opportunities worth looking into. Here are two that I really like right now:
Vertex Pharmaceuticals (VRTX) is a global biotechnology company working to discover, develop and commercialize innovative medicines aimed at helping those living with serious and life-threatening diseases. VRTX currently has two cystic fibrosis (CF) drugs that have been approved by the FDA — Orkambi and Kalydeco — and several more aimed at CF, oncology and influenza that are making their way through clinical trials.
I recommended the stock in my Inner Circle newsletter ahead of the FDA’s July 5 final review of Orkambi, the company’s CF genetic therapy, which was about the closest thing possible to a catalyst we could count on.
Orkambi was approved, and I was actually quite intrigued to see that the FDA left the prescription population open to all non-juvenile CF patients, which opens up a much larger addressable market than many had expected. While the labeling urges use in genetically-bounded circumstances, it’s starting to look like the therapy — which VRTX owns and is already marketing for a different form of cystic fibrosis — has crossover value for doctors with patients in extremis.
This could very likely open up a market closer to the entire CF population than the narrower 8,500-patient group that the company was originally hoping to treat. And, even at a slightly discounted $259,000 per year, the wider reach could turn this winner into an even bigger blockbuster worth $4 billion in annual revenue.
On top of that, Vertex recently reported second-quarter earnings results that were an across-the-board win, muted only slightly by the fact that the company isn’t really going to be all about sales or earnings for another year or so. What this company is really all about is its pipeline of new products that are clearing the FDA and moving to commercial markets, which opens up tons of potential in both the near and long term.
Clovis Oncology (CLVS) is another name I like right now. This company is a true clinical-stage drug developer working to improve the lives of those living with cancer. While it’s still far from a regular revenue stream, much less profitability, everything that makes this stock attractive to long-term investors boils down to its clinical pipeline.
CLVS currently has three product candidates in clinical stages: rociletinib, which is in Phase II development stages for the treatment of non-small cell lung cancer; rucaparib, which is in Phase II and III clinical trials for the treatment of ovarian cancer; and lucitanib, which is in Phase II trials for the treatment of breast and lung cancer. Both rociletinib and rucaparib have received breakthrough therapy designation by the FDA, which is intended to speed up the review process for drugs that treat serious life-threatening conditions.
We owned this stock in my Absolute Capital Return newsletter toward the end of last year, and were able to lock in a solid 24% return in just two months. At the time, I believed this stock could be worth $90 one day, and I continue to believe that today. In fact, I think it could be worth even more.
CLVS climbed to an all-time high of $102.28 earlier this year, and while it is well off its highest levels, I think we could easily see it move back up as the company’s extremely promising medications move through the pipeline.
Hilary Kramer is the editor of GameChangers and Breakout Stocks Under $10.
