- AbCellera Biologics (ABCL): Impressive sales growth is very promising for this firm and its antibody discovery platform.
- SIGA Technologies (SIGA): Improved profitability and a remarkable ROE make it very attractive.
- Ovid Therapeutics (OVID): Revenue surged in 2021 and the company turned profitable, an inflection factor to monitor.
Investing in biotech stocks is not suitable for all investors, as the biotech industry is full of companies that are very volatile and move fast based on news. Many companies have a pipeline that is promising but does not yet generate any revenue.
I’ve found three biotech stocks to buy under $10 that have one common but very important feature: these are profitable companies. Looking for low price biotech stocks on its own is not enough. Avoiding biotech companies with drugs in the early stages of clinical trials significantly reduces your risk. It is not uncommon to find biotech stocks take off only on clinical trials and on publication of studies; the trick is to sort through the plethora of companies in the healthcare sector that specialize in biotech and find the ones with tangible reasons to buy.
Factors like revenue growth and profitability are solid places to start from when screening biotech stocks to buy. Each of these companies has an economic moat in the biotech industry.
AbCellera Biologics (NASDAQ:ABCL) provides an artificial intelligence antibody discovery platform that searches, decodes and analyzes natural immune systems with the purpose to find antibodies to develop them into drugs. In its corporate overview dated Feb. 10, AbCellera Biologics mentioned that it had 35 discovery partners, 69 programs started, five molecules in the clinic and 155 cumulative programs under contract — a very strong portfolio indeed.
The company has a very strong revenue growth. In 2019, 2020 and 2021, sales increased 31%, 1,908% and 61% respectively. In 2021, AbCellera Biologics reported revenue of $375 million and a net income of $153 million.
While there are many biotech stocks under $10, ABCL stock stands out as it generates positive free cash flow as of 2020. In 2021 the company reported a free cash flow of $186 million, an impressive growth of 1,330% in 2021.
Share of AbCellera Biologics are around $8, but analysts seem to be very bullish now. The median price target is $36.50, representing a potential gain of over 350%.
SIGA Technologies (NASDAQ:SIGA) brags on its website that it was No. 27 on a Forbes list of the best small-cap companies, but this is not the only reason why you should keep SIGA stock on your watch list of biotech stocks to buy. The company’s lead product, TPOXX, was approved by the FDA in 2018 for the treatment of smallpox.
The company also notes that more than $1 billion in contract value has been awarded by the U.S. government, and that has been reflected in the revenue growth. In 2020 and 2021 sales increased 367% and 7% respectively, and in 2021 SIGA Technologies reported improved profitability of $69 million compared to a net income of $56 million in 2020.
This improved profitability is reflected in two key metrics: net margin and return on equity. While many biotech companies struggle to make any profit, in 2021, SIGA Technologies improved its net margin to 52% from 45% in 2020. The return on equity has been very strong for the past two years. In 2020 it was reported at 50%, and in 2021 it was 46%.
Shares of SIGA Technologies are under $7 and have a very attractive price-to-earnings ratio of 7.4.
Ovid Therapeutics (NASDAQ:OVID) has spent the year so far in penny stock range around $3, and it has a P/E of 1.7. The company is developing medicines for people with neurological disorders, with the goal “to develop medicines that transform the lives of patients with epilepsies and seizure-related disorders.”
Ovid Therapeutics has license and collaboration agreements with companies like Healx, AstraZeneca (NASDAQ:AZN), H. Lundbeck A/S (OTCMKTS:HLUKF), Northwestern University, and Marinus Pharmaceuticals (NASDAQ:MRNS), and a pipeline consisting of two candidates in phase-3 of the Food and Drug Administration approval process targeting the treatment of Dravet syndrome and Lennox-Gastaut syndrome.
According to Ovid Therapeutics, its pipeline has drugs “that would potentially be the first to make a meaningful impact in the lives of individuals with certain rare neurological conditions, and all address significant markets.”
On the fundamental analysis, it is good news that the firm reported a surge in revenue of 1,552% in 2021 to $208 million and that in 2021 it turned profitable, reporting a net income of $120 million.
Analysts are bullish on OVID stock with a median price of $5.50 over the next 12 months, a potential profit of 86%.
On the date of publication, Stavros Georgiadis, CFA did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.