7 Contrarian Biotech Stocks to Consider Amid Sector Weakness


  • Amgen (AMGN): Leader in advancing oncology treatments for over 40 years.
  • Novartis (NVS): Major player in gene therapy development.
  • Gilead Sciences (GILD): Pioneer in antiretroviral therapy for HIV.
  • Read more about these top contrarian biotech stocks.
Contrarian Biotech Stocks - 7 Contrarian Biotech Stocks to Consider Amid Sector Weakness

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Last October, life sciences giant Thermo Fisher Scientific (NYSE:TMO) inadvertently laid out the case for contrarian biotech stocks. According to Reuters, the company revealed that a slump in demand from the biotech sector for its services could extend into 2024. Not surprisingly, the market didn’t appreciate the announcement and sent TMO tumbling downward.

However, the red ink was short-lived. Since that announcement to the end of last year, TMO stock gained 22.5% of market value. Stated differently, betting on contrarian biotech stocks can be risky due to their unpredictable nature. Circumstances could be going along smoothly and then wham! A poor clinical result could send shares into the abyss.

On the other hand, the sector remains permanently viable for attempting to uplift the human condition. According to Grand View Research, the global biotech market reached a valuation of 1.55 trillion last year. And the industry could print revenue of $3.88 trillion by 2030.

So, if you’re patient enough, you can potentially win big in the medical innovation space. On that note, below are contrarian biotech stocks to consider amid sector weakness.

Amgen (AMGN)

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One of the top multinational biopharmaceutical firms, Amgen (NASDAQ:AMGN) plays a significant role in advancing oncology or the branch of medicine that deals with the study, treatment, diagnosis, and prevention of cancer. Per the company’s website, it’s been committed to changing the course of cancer treatment for more than 40 years.

Currently, the market doesn’t seem to appreciate the narrative, with AMGN stock looking unstable since the beginning of February. Still, that also means that shares trade at just under 16X trailing-year earnings (without non-recurring items). That’s notably better than the sector’s median print of 22X.

Over the long run, the global oncology market could clock in at $470.61 billion by 2032. That represents an 8.8% compound annual growth rate from 2023. In the prior year, the sector reached a valuation of $203.42 billion.

Analysts largely see good things ahead, rating shares a consensus moderate buy with an average price target of $311.90. Further, the high-side target lands at $380, providing significant room for optimists of contrarian biotech stocks.

Novartis (NVS)

Novartis (NVS) logo on a corporate building during daylight
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A Swiss multinational pharmaceutical corporation, Novartis (NYSE:NVS) represents one of the biggest players in the broader healthcare ecosystem. As for its relevance to contrarian biotech stocks, it commands a massive presence in the field of gene therapy. In particular, Novartis focuses on developing innovative treatments for genetic disorders and rare diseases. However, shares haven’t looked well since late January.

While it’s daunting at times to engage equities when they’re down, NVS now trades at an attractive earnings multiple of under 14X. In contrast, this metric sits favorably lower than 72.35% of sector rivals. At the same time, Novartis enjoys excellent margins across the board and consistent annual profitability.

Further, Grand View Research points out that the global gene therapy market size hit $8.67 billion last year. By 2030, sector revenue could be $29.51 billion, representing a CAGR of 19.5%.

Analysts anticipate an optimistic framework with a moderate buy view of NVS. Also, the average price target lands at $114. If you want contrarian biotech stocks at a discount, Novartis could be it.

Gilead Sciences (GILD)

A Gilead Sciences (GILD) sign at the company headquarters in Silicon Valley, California.
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At first glance, Gilead Sciences (NASDAQ:GILD) seems a risky proposition, even with the established theme of contrarian biotech stocks. With a crimson-laden print that just isn’t inviting since the start of the year, GILD stock may be a hard pass for many. Also, it doesn’t help that last year, shares ran all over the map. Still, patience could be rewarded.

Fundamentally, Gilead has long been a leader in the development of antiretroviral therapy for HIV, according to its website. Moreover, the company’s researchers have developed 11 commercially available HIV medications. In addition, it’s advancing a robust pipeline of next-generation therapeutic options.

While significant innovations have helped the healthcare ecosystem manage the disease, approximately 1.2 million people in the U.S. have HIV. Worryingly, 13% of them don’t know it and need testing. By logical deduction, Gilead will be a significant force for years to come.

Analysts recognize this dynamic and rate shares a consensus moderate buy with an $86.94 price target. Further, the high-side target shoots up to $105.

Bristol-Myers Squibb (BMY)

Bristol-Myers (BMY) logo at the top of a cellphone.
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A multinational pharmaceutical company, Bristol-Myers Squibb (NYSE:BMY) finds itself in a rather strange place. According to CNBC, the company recently reported quarterly earnings and revenue that topped expectations. In particular, its portfolio of new drugs posted robust sales growth. As well, management disclosed a full-year revenue estimate in line with expectations but believes earnings can come in higher than expected.

However, BMY’s performance in 2023 has been ugly, with factors such as generics competition hurting demand. To be upfront, Bristol Myers Squibb’s performance in the new year isn’t exactly inspiring. However, that also means that in the context of contrarian biotech stocks, BMY appears a bargain. For example, shares trade at only 6.8X forward earnings. In contrast, the sector median value comes in at 14.7X.

Per its website, Bristol Myers specializes in immuno-oncology, a process which harnesses the body’s immune system to fight cancer. In 2023, this subsegment was worth $40.74 billion. By 2034, the space could fly to just over $396 billion.

Analysts peg shares as a moderate buy with a $57.79 price target. The high-side estimate stands at $90.

AstraZeneca (AZN)

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An Anglo-Swedish multinational pharmaceutical and biotech firm, AstraZeneca (NASDAQ:AZN) features an expansive product portfolio. It covers major diseases in areas including oncology, cardiovascular, gastrointestinal, infection, neuroscience, respiratory and inflammation. Unfortunately, Wall Street isn’t impressed, sending shares down sharply this year. Also, AZN stock suffered negatively tilted choppiness throughout 2023.

Still, if we’re talking about contrarian biotech stocks, it’s difficult to ignore AstraZeneca. With the red ink, AZN now trades at a forward yield of 14.41X. To be fair, that’s only a bit better than average. However, the print was much higher in the early years of the pandemic.

Moving forward, AstraZeneca could bounce back through its respiratory disease therapeutic unit. For instance, the global lung disease therapeutics market reached a valuation of $83.4 billion last year. By 2033, the segment could be worth $152.37 billion, representing a CAGR of 6.2%.

Analysts rate shares a consensus moderate buy with a $79.80 price target. In September, Bank of America Securities believed AZN stock could reach up to $88, presenting an intriguing candidate for contrarian biotech stocks.

Sanofi (SNY)

Sanofi (SNY) logo on the side of company branch in Germany
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A French multinational pharmaceutical and healthcare firm, Sanofi (NASDAQ:SNY) engages in the research and development, manufacturing and marketing of pharmacological products. Mainly, this directive aligns with the prescription market though it also develops over-the-counter medications. The company covers seven major therapeutic areas: cardiovascular, central nervous system, diabetes, internal medicine, oncology, thrombosis and vaccines.

Given Sanofi’s broad reach, its shares make for a tempting idea for contrarian biotech stocks. Since January, SNY hasn’t gotten off to the best start. And the trailing 52-week performance is rather disappointing. At the same time, the crimson stains also facilitate an attractive valuation. Presently, shares trade at only 10.71X forward earnings, better than 69% of the company’s peers.

Looking ahead, Sanofi could benefit hugely (albeit cynically) from diabetes care. In 2021, 38.4 million Americans or 11.6% of the population had diabetes. Within this tally, 8.7 million were undiagnosed, pointing to a large addressable market.

Unsurprisingly, analysts peg shares a moderate buy with a robust price target of $61.67.

Biogen (BIIB)

BIIB stock: Biogen Factory Building in: Luterbach Solothurn Switzerland
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When it comes to contrarian biotech stocks, it probably doesn’t get any more contrarian than Biogen (NASDAQ:BIIB). Recently, the company released its fourth-quarter financial results, which were weighed down by declining multiple sclerosis (MS) sales. Also, Biogen incurred one-time costs related to dropping its Alzheimer’s drug Aduhelm.

On the top line, the biotech posted over $2.3 billion in sales for Q4, a drop of 5% from the same period in 2022. Conspicuously, Biogen’s revenue from MS products came out to $1.1 billion, down 8% from the prior year. As if the company needed any more bad news, management also disclosed demand erosion due to competition from generic drugs.

Further, the leadership team stated that dropping Aduhelm represented a difficult decision. However, it may have been the best decision in the short term. Looking ahead, new product launches may help bring Biogen’s revenue back to a northward direction.

There’s no denying that BIIB stock is printing some ugly performance stats. However, analysts rate it a consensus moderate buy with a $305.83 price target. Also, the high-side target clocks in at $379.

On the date of publication, Josh Enomoto 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.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.

Article printed from InvestorPlace Media, https://investorplace.com/2024/02/7-contrarian-biotech-stocks-to-consider-amid-sector-weakness/.

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