Amid the stock market turmoil, wagering on the best biotech stocks could be a savvy move.
The stock market has been tumultuous lately, which could spur a pivot toward defensive biotech stocks. Since biotech companies develop essential drugs and therapies, they often navigate independently from the broader market. Hence, biotech stocks offer promising investment opportunities, especially those pioneering innovative healthcare solutions.
Moreover, as global health priorities shift and demand for advanced therapeutics climbs, certain biotech firms will likely outperform others. Additionally, the FDA’s streamlined pathway for developing critical medications enhances the prospects for the market’s finest. Also, the best biotech stocks can shell out a boatload of cash in developing new therapies, which, if approved, could generate billions in incremental sales.
That said, the spotlight shines on these three best biotech stocks poised for substantial long-term growth. Each boasts healthy fundamentals and an innovative pipeline that promises to meet and exceed market expectations.
Vertex Pharmaceuticals (VRTX)
Vertex Pharmaceuticals (NASDAQ:VRTX) is a popular biotech giant known for its leadership in cystic fibrosis (CF) treatments. To put things in perspective, its CF treatments treat roughly 67% of the estimated 88,000 patients in North America, Europe and Australia. However, over the past few years, it has been actively expanding its treatment pipeline into other areas, including sickle cell disease and pain management.
Furthermore, it’s spreading its tentacles in the rare disease drug space, substantially reducing investment risk by staying ahead of its competition. Its partnership with gene-editing specialist CRISPR Therapeutics (NASDAQ:CRSP) has yielded fruit, with Casgevy being green-lit by the FDA to treat transfusion-dependent beta-thalassemia and sickle cell disease.
As we look ahead, I expect Vertex to continue innovating and addressing unmet medical needs in genetic disorders beyond CF. With north of $2.69 billion in free-cash-flows (FCF), Vertex has the impetus to continue expanding its market share through organic and inorganic growth.
Pfizer (PFE)
Pfizer (NYSE:PFE) stole the spotlight during the pandemic, with its Covid vaccine and Paxlovid treatment playing a pivotal role in the fight. Consequently, PFE stock rose to record highs, but with the pandemic in the rear-view mirror, it lost more than 35% of its value in the past three years.
However, recent quarters have shown healthy progress in diversifying away from its Covid portfolio. It has been making headlines of late after a superb robust Q2 showing, beating top-and-bottom-line estimates easily. Consequently, its management upgraded its full-year financial outlook. This shift comes when Pfizer is undertaking major cost-cutting measures, as it potentially loses out on its market relevance.
The company’s financial outlook is being driven by a combination of acquired drugs and newly launched treatments, which should help in offsetting demand for its Covid portfolio. Therefore, PFE stock is an excellent bet at current levels, trading at just 2.70 times forward sales estimates. Also, let us not forget its superb dividend profile, currently yielding 5.65%, with 13 consecutive years of payout growth.
Merck (MRK)
Merck (NYSE:MRK) is a top blue-chip pick in the biotech space, which stands out for its superb bottom-line performance. Despite the headwinds in play, its net income margin of 22% comfortably beats its 5-year average at 24.6%. Additionally, despite a slight dip in its levered free cash flow margin compared to its 5-year average, Merck’s margin remains impressive at 15.62%. On top of that, the stock yields a remarkable 2.45%.
Like Pfizer, Merck recently posted stellar Q2 results, with its EPS surging to $2.28, beating analyst estimates of $2.15. Moreover, its revenues of $16.11 billion exceeded expectations by 1.72% compared to the forecasted $15.84 billion.
Furthermore, a lot of Merck’s bull-case hinges on its robust pipeline, featuring 30 programs in phase three and over 80 in the second phase. The commercialization of these new molecular entities positions Merck for massive growth in the oncology segment, which could generate up to $20 billion in sales by mid-2035.
On the date of publication, Muslim Farooque 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 held a LONG position in CRSP.
