When I think of biotech stocks, I imagine volatile share prices and plenty of red ink. I also think of big-time shareholder returns for the industry’s winners.
However, looking through the Bloomberg Billionaires Index, I don’t see one biotech company in the top 100. They must come later.
How are biotech stocks doing in 2024? The Nasdaq Biotechnology Index, a list of 215 biotech and pharmaceutical stocks, is doing okay, up nearly 8% year-to-date, but less than half the Nasdaq 100. The gap gets worse over five years.
The good news is that the index tends to go on long upcycles — it gained 341% from August 2011 through July 2015 — and the latest one might have started last October. It’s up 33% since late October.
Who are the biotech stocks to buy in July if you’re hoping to ride the wave? Here are my three choices.
Gilead Sciences (GILD)
Gilead Sciences (NASDAQ:GILD) is the largest of the three, with a market capitalization of $91.6 billion. Its shares are down over 9% in 2024 and up only 13% over the past five years.
Founded in 1987, Gilead is perhaps best known for delivering a cure for Hepatitis C and helping prevent HIV. In addition to those two areas, it’s currently working on over 20 different indications for oncology treatments. It plans to be a top 10 oncology company by 2030 and wants to have 10 or more transformative therapies available in six years.
Its top commercial drug is Biktarvy, its one-pill, once-a-day, treatment of HIV-1 for adults and children who weigh more than 55 pounds. In Q1 2024, the drug’s sales were $2.9 billion (43% of revenue), 10% higher year-over-year.
Other top-selling drugs include Sofosbuvir and Velpatasvir used in combination to treat Hepatitis C ($405 million), and Veklury, used to treat mild-to-moderate cases of Covid-19 ($555 million). Its oncology revenue was $789 million in the first quarter, 18% higher than a year ago.
Despite the lack of gains for GILD stock, its 4.1% dividend yield is attractive. Get paid to wait for it to build its oncology business.
Jazz Pharmaceuticals (JAZZ)
Jazz Pharmaceuticals (NASDAQ:JAZZ) is the next largest of the three, with a market cap of $6.86 billion. Its shares are down 11% in 2024 and 20% over the past five years.
I haven’t paid much attention to Jazz since it acquired GW Pharmaceuticals for $7.2 billion in 2021. GW was known for its CBD-based drug, Epidiolex (Epidyolex in Europe). Back then, cannabis was all the rage.
In Q1 2024, Epidiolex’s revenue grew 5% over last year to $198.7 million. It is Jazz’s second-best-selling drug behind only Xywav (which treats narcolepsy and idiopathic hypersomnia). That drug generated $315.3 million in the first quarter. Xywav and Epidiolex accounted for 57% of the company’s revenue.
In 2024, it expects revenues of $4.1 billion at the midpoint of its guidance, with adjusted earnings per share of $18.75. Based on its estimate, its shares trade for just 5.8x its EPS for 2024.
Its free cash flow for the trailing 12 months ended March 31 was $983.5 million. Based on an enterprise value of $10.8 billion, it has a free cash flow yield of 9.1%. Anything over 8% is value territory.
Supernus Pharmaceuticals (SUPN)
Supernus Pharmaceuticals (NASDAQ:SUPN) is the smallest of the three, with a market cap of $1.60 billion. Its shares are up nearly 5% in 2024 and down 9% over the past five years.
Of the three, Supernus is the one I’m not at all familiar with. The company has over 30 years of experience with CNS (central nervous system) drugs, including four products for ADHD (attention deficit hyperactivity disorder).
Its top-selling drug in the first quarter was Qelbree, with $45.1 million in sales, 75% higher than a year earlier. It is used to treat adults and children six and older with ADHD.
On the downside, Trokendi XR, its drug for preventing migraines, lost exclusivity in 2023. Its sales were down 54% year-over-year to $16.0 million. In 2024, Oxtellar XR, its drug to treat partial seizures, lost its exclusivity. Its sales were down 7% in Q1, to $26.9 million. Excluding these two drugs, its sales increased 12% in the first quarter to $100.7 million.
Only four analysts cover its stock, but three rate it a Buy with a target price of $40.50, significantly higher than its current share price.
On the date of publication, Will Ashworth 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
