It’s been a volatile start to the second quarter for many sectors. However, investors continue to seek out undervalued biotech stocks for robust returns over the long term. Plenty of options exist in various niches within the biotech sector. That said, investor focus remains on key sectors, including weight-loss drugs, Parkinson’s treatments and drugs aimed at Alzheimer’s.
It’s worth pointing out that biotech stocks are among some of the higher-risk options in the market. These companies’ massive capital spending budgets with uncertain future revenue streams make most stocks very speculative bets by their inherent nature.
But some stalwarts in key spaces are worth considering for the long haul. Aging demographics and other tailwinds in key areas make these three stocks worth buying.
Eli Lilly (LLY)
Eli Lilly (NYSE:LLY) continues to capitalize on the booming weight loss drug market with Zepbound, targeting the obesity epidemic. Zepbound’s injectable solution is proven to yield significant weight loss for patients, with analysts projecting potential annual revenue of more than $25 billion.
Eli Lilly has also partnered with Amazon (NASDAQ:AMZN) Pharmacy to distribute medications, including Zepbound. LillyDirect offers telehealth consultations for prescriptions and home delivery. The move targets weight-loss drug demand, competing with traditional pharmacies. LillyDirect currently offers 14 medications, with growth plans to expand this assortment.
Eli Lilly’s demand for its drug has led to significant Zepbound shortages, which are expected to be seen through the end of this month. This could lead to underwhelming results, given where expectations are for the company’s growth trajectory.
That said, I think the company’s strong demand for its core weight-loss drug offerings is a sign of immense value creation over the long-term. Those seeking a true winner in the biotech space should consider this stock on any significant dips.
Vertex Pharmaceuticals (VRTX)
After receiving their approval for their gene therapy project, pharmaceutical giant Vertex Pharmaceuticals (NASDAQ:VRTX) is raising capital to start production. The company’s pipeline includes a revolutionary cystic fibrosis treatment with a combination of its drugs, Kalydeco and Trikafta. The company anticipates FDA approval for VX-548, expanding the indications beyond cystic fibrosis to other ailments.
Vertex has surged over the past year, with a 41% move higher in 2023 alone. Many analysts expect this trend to continue, with the stock’s rise tied to Vertex’s solid financials and a robust drug pipeline. Since its IPO, VRTX stock has outperformed the S&P 500, offering rewarding upside to investors who bought into the company’s innovative drugs and strategic partnerships in its key business segments.
Vertex Pharmaceuticals launched the late-stage phase II/III AMPLITUDE study on inaxaplin for APOL1-mediated kidney disease. The study now includes adolescents. It aims to assess kidney function improvement compared to placebo. An interim analysis at week 48 may prompt FDA accelerated approval.
Amgen (AMGN)
Pioneering some of the most innovative therapies with the help of advanced genetics, Amgen (NASDAQ:AMGN) is undoubtedly a biotech stock worth paying attention to. The company has grown drastically since 1980, providing relatively steady growth in this sector. This has allowed Amgen to be among the few biotech stocks to pay dividends, with a 3.3% yield at the time of writing. So, this stock is more than just a growth story – there’s also an income component to consider.
With a valuation of roughly $145 billion at the time of writing, investors in Amgen benefit from the company’s size and scale. Amgen is another player exploring obesity drugs, with its MariTide offering similar to those provided by its peers (monthly injections). Should Amgen generate significant traction in this market, it could be an under-appreciated stock. Goldman Sachs (NYSE:GS) seems to think so, rendering a conviction buy rating on AMGN stock.
Although Amgen faces growth challenges similar to other large-cap pharma names, the company has weathered the storm relatively well. The stock has traded roughly flat over the past year, providing an intriguing entry point for long-term growth and dividend investors to get in right now. The company also fortifies its portfolio against biosimilars with a robust pipeline and international presence. So, for those seeking long-term upside in this sector, this is a company to put on your watch list now.
On the date of publication, Chris MacDonald 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.
