Owning biotech stocks during the second half of 2015 was nothing less than miserable. But they weren’t much easier to hold in early 2016 either.
But a light started to shine at the end of the tunnel a few weeks ago.
Some are doing better than others, of course, but it’s increasingly clear the industry as a whole isn’t inevitably doomed. Now rather than later may be an ideal time to get into one or more of the underappreciated names in the group.
With that as the backdrop, here’s a closer look at ten of the better stocks to buy among the market’s rebounding biotech names. Some are well-established, while others simply have catalysts on the near-term calendar. All of them, however, are worthy of consideration.
Biotech Stocks to Buy: Celgene Corporation (CELG)
To be fair, the drug industry’s proverbial falling off the so-called “patent cliff” a few years back was indeed disruptive. Intent on never being caught off-guard again, however, investors are thinking a little too defensively/pessimistically now.
Once traders realize it’s a tad too soon to punish the company, the recent tumble from CELG should turn around.
The kicker: While investors have been focused on what might happen to Revlimid in the relatively distant future, they’ve overlooked one of the biggest reasons CELG should be on a list of biotech stocks to buy: Otezla, for psoriasis, is just starting to take off after a slow start following its 2014 approval.
It already controls more than 40% of the U.S. market, and its projected revenue of $1 billion this year is expected to reach a range of $1.5 billion to $2 billion next year.
Biotech Stocks to Buy: Anika Therapeutics Inc (ANIK)
Most small-cap biotech stocks aren’t profitable. For that matter, a lot of small-cap biotech stocks aren’t even driving revenue. They simply have a promising R&D pipeline.
Anika Therapeutics (ANIK) is an exception to that norm, and has earned a spot on the top ten list of hot biopharma stocks; because not only is it profitable, it’s also reasonably priced. ANIK sports a trailing price-earnings ratio of 21 and a forward-looking P/E of 25, and it’s got the growth rates to justify this above-average valuations.
Last quarter — the company’s first fiscal quarter of 2016 — revenue grew 44% on a year-over-year basis, and earnings of 45 cents per share handily topped estimates of 28 cents. It wasn’t the first time Anika has posted stellar numbers.
Osteoarthritis drugs Orthovisc and Monovisc have been doing the bulk of the growth so far, but now that Cingal has been approved in Europe and Canada (not to mention is being tried in conjunction with other drugs for new indications), Anika Therapeutics remains on a growth path.
Biotech Stocks to Buy: Biogen Inc (BIIB)
A little over a year ago, Biogen (BIIB) was a biotech hero. Its multiple sclerosis drug Tecfidera was a smash hit, and BIIB was a must-have. But last April, shareholders had a bomb dropped on them — it was recognized that one of the key components of the drug may be linked to a rare brain infection.
By mid-year the sales for an already slowing Tecfidera were pared back from around 15% growth in 2015 to only 7%. Unable to shake their worries, BIIB shares lost nearly 50% from their March-2015 peak to this March’s low.
The punishment doesn’t fit the actual crime, though. Last quarter, sales grew 20% and earnings ramped up more than 50%, and the company didn’t need Tecfidera to carry all the weight. Fanning those bullish flames was Tuesday’s news that the FDA has approved Biogen’s MS treatment, Zinbryta, which it co-developed with AbbVie Inc (ABBV).
Investors are finally starting to catch their mistake, but there’s plenty of upside left before it’s priced right.
Biotech Stocks to Buy: Gilead Sciences, Inc. (GILD)
To be fair, investors had to know it was only a matter of time before the stunningly high cost of ballyhooed hepatitis-C drug came back to haunt their maker, Gilead Sciences (GILD).
The sales slowdown took hold last quarter, with expectations for Harvoni and Sovaldi combined rolling in at $4.29 billion versus expectations of $4.63 billion. This was partially because Gilead started charging more palatable prices to distributors, and also because new HCV competition from Merck & Co., Inc. (MRK), called, Zepatier, has given patients and caregivers a more affordable alternative.
The 30% tumble since last June, however — with much of it rematerializing after last quarter’s Sovaldi and Harvoni numbers were unveiled — is a punishment that doesn’t fit the crime.
Gilead remains the undisputed king of HIV drugs, and its pipeline is being bolstered again.
Biotech Stocks to Buy: BioMarin Pharmaceutical Inc. (BMRN)
BioMarin Pharmaceutical (BMRN) shareholders are still feeling the sting of the FDA’s rejection of Kyndrisa as a muscular dystrophy drug. Rather than wallowing in their own pity, they and any other would-be investors may want to put BMRN on their list of biotech stocks to buy. Another drug — BMN 270, for the treatment of hemophilia — was stunningly impressive during early trials.
In short, of the eight patients tested as part of the phase 1/2 trial, all eight at least went from a severe case to mild-to-moderate symptoms. Two of the eight saw drastic improvements.
Evercore ISI analyst Mark Schoenebaum commented on the results:
“While the data presented today were small numbers and of relatively limited follow-up the data were encouraging (though looks like significant variability from patient to patient) and (1) suggest a path forward for BMN 270 in hemophilia A (and potentially for hemo A gene therapy in general) and (2) set a reasonably high bar for competition that will follow.”
It’s a big deal, as the underserved hemophilia market will rise to $6.3 billion over the next nine years.
Although it will be a long while before BioMarin can tap into it, the milestones BMN 270 could reach along the way will help push the stock upward in the meantime.
Biotech Stocks to Buy: BioTelemetry, Inc. (BEAT)
BioTelemetry (BEAT) is the only non-drugmaker among this list. Formerly known as CardioNet, BioTelemetry is the leading supplier of heart-monitoring technology and related tools.
And it’s good at what it does, too … if the numbers are any indication. Last quarter, the company’s top line grew 12% to a record-breaking $48.6 million, and it grew (on a year-over-year basis) for a fifteenth straight quarter. Companies don’t grow that consistently without doing something right.
Better yet, unlike many of its small cap peers in the biotech industry, BEAT is reliably profitable, and has been since late-2014.
Biotech Stocks to Buy: Cempra Inc (CEMP)
Cempra (CEMP) isn’t for the faint of heart, but traders who can stomach the risk/volatility may want to add to this small cap to a list of biotech stocks to buy sooner than later.
Cempra primarily develops differentiated antibiotics to treat the growing number of antibiotic-resistant infections. It has a couple of drugs on the market, but any bullish thesis on CEMP is mostly going to be based on its pipeline, solithromycin in particular, which is a treatment for moderately-severe community acquired bacterial pneumonia (CABP).
Biotech Stocks to Buy: Juno Therapeutics Inc (JUNO)
Like many biotech stocks, Juno Therapeutics (JUNO) doesn’t have any products to speak of on the market yet. JUNO has earned a spot on a list of stocks to buy based on the strength of its pipeline … a long-term pipeline at that.
The flagship of that pipeline is CD19 — a CAR T cell therapy candidate that Juno Therapeutics has tweaked to fight lymphoma, and being tested in multiple phase-1 and phase-2 trials at this time.
Last month, Celgene Corporation (CELG) paid Juno $50 million for the rights to sell the drug outside the United States if approved. That’s an awful lot of money for the drug not to be the real deal.
Biotech Stocks to Buy: Alexion Pharmaceuticals, Inc. (ALXN)
While most major pharma names are starting to hit a bit of a revenue headwinds with previously high-growth drugs, Alexion Pharmaceuticals (ALXN) still seems to be picking up steam with Soliris … despite the fact that it’s been on the market since 2007.
The company continues to find new indications for the drug — also known as eculizumab — squeezing out 11% sales growth last quarter.
There’s still lots more to go, though. Soliris is currently in four late-stage trials, with updates slated throughout the remainder of the year.
Throw in the fact that the company is preparing to launch two new enzyme-replacement drugs in the U.S. that could generate $180 million in new sales between them, and the new lineup puts ALXN on a short list of biotech stocks to own sooner than later.
Biotech Stocks to Buy: Regeneron Pharmaceuticals Inc (REGN)
Between a portfolio with just one true “blockbuster” drug so far, a trailing P/E of more than 60 and a stock priced at a psychologically challenging $396 per share (the price level shouldn’t matter, but it does), Regeneron Pharmaceuticals (REGN) is a tough stock to justify buying right now.
The REGN you know and see now, however, isn’t the same REGN you’ll see and know five years from now. Rheumatoid arthritis drug Sarilumab will get a final yay or nay from the FDA later this year, and Dupilumab is slated for an approval decision next year.
In the meantime, relatively new Praluent and Eylea should continue to grow sales. The former got off to a slow start a quarter ago, but the pros at one point suggested the cholesterol drug could generate $4 billion in sales by 2019.
Meanwhile, after a sales lull for diabetic retinopathy drug Eylea last year, Regeneron recently upped its 2016 sales-growth outlook from 20% to a range of 20% to 25%. That should put annual Eylea sales over the $3 billion mark.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.